Corporate America Is Investing, But Tax Cuts Aren't Top Reason

(Bloomberg) -- Corporate America is stepping up its investment plans this year, but the main reason may come as a surprise. An improved business outlook -- rather than the Trump administration’s tax cuts -- is driving companies’ decisions.

About a third of purchasing and supply executives say they’ve recently boosted their capital spending plans for the next 12 months, according to the Institute for Supply Management’s latest semi-annual forecast, released Monday. Within the share that said they’re ramping up their investment plans, the recent tax overhaul was cited as the reason by just 14.4 percent of respondents at factories and 18.6 percent at service providers.

The “general business outlook” was the primary catalyst -- cited by 69 percent in manufacturing and 58 percent in services, according to ISM. The survey didn’t elaborate on what the general business outlook included.

Republicans have said the new tax law’s slashing of the corporate rate and a provision that allows companies to fully write off their capital expenditures right away will lead to increased investment, more job creation and faster economic growth. President Donald Trump highlighted the expensing measure during a small-business tax roundtable in Florida last month, saying it would have a bigger impact than almost anything else in the bill.

“Nobody thought they’d ever see that,” Trump said. “And that’s had a huge impact.”

Before Trump signed the tax law, 5.8 percent of respondents in manufacturing and 4.3 percent of those in services said tax changes were the reason for increasing capital spending plans over the next 12 months, according to a December ISM report. At that time, firms were awaiting final details on corporate changes.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net.

To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Alexis Leondis

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