Broaddus/Cap Spending-2: Productivity Slowing Job Growth
16 Jan 14:49
By Mary Ellen Lloyd
Of DOW JONES NEWSWIRES
CHARLOTTE (Dow Jones)--Federal Reserve Bank of Richmond President Alfred
Broaddus said he remains "pretty tentative" on whether capital spending will
pick up in 2003, though he believes financial conditions that might foster a
firming are increasingly evident.
"The evidence we're seeing of a pickup currently is not substantial,"
Broaddus said during a question-and-answer session with members of the
Charlotte Economics Club following a speech.
"What we're seeing is pretty much a continuation of what we saw in 2002,
where we saw a modest increase in spending on equipment and software," he said.
Some spending might be because high-tech equipment depreciates fairly rapidly
or software changes can't be delayed any longer, he added later in comments to
reporters.
Anecdotal evidence suggests "especially in the manufacturing sector, that
there's not much planned on additional spending," he said. But Broaddus said he
is hearing some projects are planned and may be initiated during the year.
Still, he expects some businesses will buy new equipment and software to
remain competitive and enhance profitability, given an environment with limited
pricing power, he said. In addition, increasing corporate profits and cash flow
position companies to finance such capital expenditures internally, he said.
Broaddus said businesses' improved productivity is one factor in retarding
job growth and "may continue to be a factor in the near-term future." But, he
said, "If we have economic growth along the consensus view, we should see
sustained, moderate job growth in the first half of the year."
Broaddus said data on the manufacturing sector's prospects for improvement
varies from one industry to another. Still, he said recent reports show "some
evidence that that sector of the economy may be beginning to stabilize."
Regarding consumer spending, Broaddus said once you remove car sales from
recent retail-sales data, the data is "consistent with other numbers."
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