Despite signs of recovery in the U.S. economy, the capital goods sector is still mired in a recession that began in mid-2000, with the timing of its recovery uncertain, according to a Standard & Poor's Ratings Services report published recently. Unlike consumers, businesses have curbed their spending in the face of excess production capacity, continued profit pressures, and a potential war in Iraq, the report notes. While economic forecasters expect a modest GDP growth of 2.5% for 2003, poor visibility for industrials in turn blurs the timing and magnitude of recovery for capital goods, according to the report.
“Standard & Poor's best estimate is for some improvement in capital goods markets in the second half of 2003, gaining momentum in 2004," said Standard & Poor's credit analyst Robert Schulz.
"Sector firms should show some year-over-year earnings growth in 2003, largely driven by cost-cutting actions, and a modest market recovery starting in the second half of the year," Standard & Poor's credit analyst Dan DiSenso added.
The report includes comments on 92 rated firms and a summary of recent rating actions. "Industry Report Card: U.S. Capital Goods" is available on RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com.
