One of the big things to watch in any recovery is a switch from cost cutting to investment. While a lot of focus is placed on what the big boys do it’s always worth watching those further down the line.
SME’s can make the big difference in boosting an economy as they are closer to ground level and main street and so are more in tune with that side of sentiment.
The WSJ had an article out this week that suggests that SME’s are ready to make the shift from trimming to expenditure. They’ve taken their findings from a survey undertaken with Vistage that shows that over half of firms with less than $20m in revenue plan to increase investment in the next 12 months, that’s a 42% increase on the year.
WSJ SME survey 06 09 2014
Expectation is one thing and reality is another, which is why it’s positive that the NFIB survey in July showed that 55% of SME’s said that they had made capital outlays in the previous six months.
Small firms are keeping up with their big brothers too. Small public listed companies with annual sales less than $25m increased investment spending by 13% against a year ago while capital spending at S&P listed firms turning over more that $5bn rose 16% over roughly the same period.
Within economic cycles there are tide like movements and we are just coming off a period where firms had to cut back. Now the next tide is the flow into expenditure and that wave will bring a second wind to the US economy, just like it has in the UK. Nearly all of it is driven by simple sentiment not central banks and QE, and that’s where the real power lies. Even after all the QE pumping firms are only now feeling more confident to grow and invest in their businesses.
If this area continues to improve, it will be where all the action is for the US economy.
