HOUSTON — While 2002 was an uncertain year, 2003 should see improving business conditions as corporate finance is reformed and consumer confidence returns, according to Industrial Information Resources’ recently released 2003 Industrial Outlook.
In general, 2002 ushered in an era of economic uncertainty, in part due to financial failures of companies such as WorldCom and Enron, the research firm reported. This era of uncertainty has caused sluggish business conditions for industrial spending in the United States.
One of the pivotal points for the U.S. economy is restoring consumer confidence in the equities market. This will start by holding corporate executives accountable for financial reporting, the firm said.
Since early 2001, all major indices have depreciated. Billions of dollars have been diverted away from the stock market to more secure investments such as money market accounts, treasuries and bonds, IIR said.
While the stock market is being deflated, corporations are finding themselves at the mercy of bond rating firms such as Moody’s and Standard & Poor’s. Capital expenditure holds tightly to corporate bonds. Projects lose their justification when interest payments become too substantial.
During 2002, IIR identified more than 705 new plant startups from grass-root construction and/or plant relocations (previously closed plants restarting with new ownership or new manufactured product).
During 2003, IIR is forecasting 735 new plant startups to come online. Industries with the most notable growth in term of new plants startups in 2003 will include food and beverage with 157 plants, industrial manufacturing with 149 plants and power with 148.
One of the leading industries in capital spending is the pharmaceutical and biotechnology sector. IIR has identified 29 new plants that will start in 2003 for this sector.
For the past couple of years, capital spending in the power industry has reached an all-time high. This trend is expected to continue in 2003 as merchant power plant construction begins to peak. IIR is forecasting that capital spending in the power industry will begin to decline after 2003. However, future projections indicate that the power industry could experience another growth period between 2005 and 2010 to meet new demand and to replace lost capacity from older units nearing retirement.
IIR’s 2003 Industrial Outlook provides an overview of the industrial market with trends for 13 industry segments, capital and maintenance spending forecast by industry for 2003 and a comprehensive international outlook. More information is available at www.industrialinfo.com.