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This key economic driver may be back in growth mode in 2020

Brian Sozzi

If the U.S. economy is to bounce-back in 2020 after last year’s trade war uncertainty driven slowdown — which is needed to justify record-setting stock markets — capital expenditure spending in Corporate America must spring to life.

On a positive note, spending on big ticket capital goods such as tech hardware and software may be gaining momentum, according to executives Yahoo Finance has chatted up at this year’s World Economic Forum in Davos. Those investors betting on a significant acceleration in capex in 2020 may be a touch disappointed, but at least budgets are finally opening up again.

Howard Elias, Dell Technologies president of services and digital, told Yahoo Finance large clients have struck a more upbeat tone on spending plans of late. That’s mighty good news for a tech giant such as Dell, which sells expensive hardware and services to enterprise customers. Elias deals directly with the players at major enterprises in charge of spending on capital equipment.

Money, finance, business concept background. USD dollar bills, skyscrapers.

The same renewed optimism around capex — even manufacturing more broadly — was struck by Schneider Electric North America CEO Annette Clayton.

“The economy is doing quite well,” Clayton told Yahoo Finance, adding she does not see signs of an industrial recession in the U.S. “We are seeing a pickup in the industrial side of the business as well.”

Schneider Electric sells a great deal of automation technology to industrial companies in North America. Although the technology helps to extract productivity from buildings, it’s not cheap to implement upfront. So when uncertainty reigns supreme in boardrooms as it did in 2019, consumers pullback on spending until the coast becomes clearer.

To be sure, 2019 stunk on the capex front. And a 2020 rebound is unlikely to be broad-based.

Domestic non-financial capex spending grew slightly year-over-year in the third quarter (latest available data), per data from the St. Louis Federal Reserve. Out of 19 sectors measured by S&P Global, eight are expected to post capex declines in 2020. Most growth rates for the remaining sectors fall around the 5% mark.

Not gangbusters by any means, but better than 2019.

Watch Yahoo Finance’s full live network coverage of the 50th Annual World Economic Forum from January 21-24 here.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Watch The First Trade each day here at 9:00 a.m. ET. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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