quote:I've been saying for years businesses are scared to spend on CAPEX. Obama's policies and hostility toward business owners isn't helping. Neither is the looming expenses associated with Obamacare.
PRINCETON, NJ -- U.S. small-business owners' net capital spending intentions for the next 12 months plunged to -14 in November, the lowest level in more than two years, according to the Wells Fargo/Gallup Small Business Index. This is down from net capital spending intentions of -1 in July and suggests the nation's small-business owners are likely to pull back on their business investments even more, given their negative expectations for the next 12 months.
The -14 November score is based on 20% of small-business owners saying they expect to increase their capital spending over the next 12 months and 34% saying expecting to decrease their capital spending. The 20% "increase" reading is down from 23% in July and the lowest level since July 2010. The 34% "decrease" reading is the highest since July 2010. In the current survey, 45% of owners expect no change in their capital spending.
The current negative net capital spending intentions mark a significant shift from the positive double-digit scores seen prior to 2008. Positive net spending intentions reflect how small-business owners usually expect to grow their businesses and take advantage of advancing technologies to help them do so. However, this has not been the case since the recession and financial crisis of 2008-2009, with net capital spending intentions reaching a low of -23 in November 2008. Small-business-owner capital spending expectations were slightly positive during the first two quarters of 2012, before turning neutral in July, and then plunging in November.
The November Wells Fargo/Gallup Small Business Index shows small-business owners are pessimistic about their future operating environment. Consistent with these negative expectations, owners' intentions are to reduce their capital spending plans and their hiring intentions over the months ahead.
Capital spending is by its nature relatively long-term. As a result, capital spending plans tend to be something business owners can defer when operating conditions are difficult. In the past, periods of significant weakness in the U.S. economy have been relatively brief -- meaning owners who delayed capital investments were able to catch up on their deferred capital spending projects relatively quickly.
This was not the case after the 2008-2009 recession and financial crisis.
I've been saying for years businesses are scared to spend on CAPEX.
quote:One would almost always prefer to spend under an operational expense because of the favorable tax treatment. You can deduct the full amount of operational expenses immediately rather than doing over long term (depreciation).
Businesses are loathe to make capital investments on IT items, and prefer to do them as OPEX.
One would almost always prefer to spend under an operational expense because of the favorable tax treatment. You can deduct the full amount of operational expenses immediately rather than doing over long term (depreciation).
With the expectation of rising tax rates, owning a (for tax purposes) depreciating asset is a super bad idea.