US capital goods spending surged in 2000

Reflecting the hype surrounding the Internet and telecommunication industries in 2000, capital investment by the high-tech industry in goods with a useful life of more than one year surged in that year, according to data released Friday by the U.S. Department of Commerce's Census Bureau.

The Bureau's annual Annual Capital Expenditures Survey (ACES) found that U.S. industry as a whole increased capital expenditures by 11.9 percent during 2000.

The jump in investment by companies in the telecommunication and semiconductor sectors was particularly steep, with capital spending roughly doubling from 1999 levels. The year also saw the information industry overtake the finance and insurance industry as the number two in capital expenditure behind the manufacturing industry.

Within high-tech sectors, the jump was greatest in the wireless telecommunication industry. Driven by the promise of wireless Internet services, such as Japan's successful I-mode service, and the vision of super-fast third-generation cellular networks, capital spending by the industry jumped 76.7 percent to US$25.48 billion during the year. Of that total, spending on equipment more than doubled from the previous year, jumping 114.1 percent to $20.1 billion, said the survey.

In the fixed-wire telecommunication sector, spending was not quite as hot although still far ahead of most other industries. Total expenditure on durable goods jumped 31.2 percent to $78.4 billion as the industry spent $57.9 billion on equipment, a jump of just over one-third from the previous year.

Of course, few carriers in the industry could foresee the eventual effects of their sharply higher spending, but today it is all too obvious. Many carriers are burdened with billions of dollars in debt and some have already been forced out of business or into mergers as a result of their exuberance. Additionally, telecommunication equipment makers that expanded with the industry during 1999 and 2000 as orders poured in have cut back their staff, sold off factories and seen their finances take a hit.

Elsewhere in the information industries sector, information services companies capital spending was $9.0 billion during 2000, a rise of 83.5 percent, while that in the data processing industry spent $3.0 billion, an increase of 55.2 percent on the previous year.

Aside from telecommunications, one of the other biggest jumps was recorded by the semiconductor industry. There, spending rose 60.0 percent to $25.7 billion during 2000. Of that, $22.0 billion was invested in equipment, a jump of 56.8 percent, said the report.

As in the telecommunication sector, the semiconductor industry quickly decelerated from the growth registered in 2000 and is struggling today. For instance, a sharp decline in the price of memory chips accompanied by lower demand for other products has led to industry-wide consolidation and reorganization as companies shed money losing divisions and team up with rivals.

The picture in the computer and peripherals manufacturing sector was in contrast to other high-tech sectors. Spending by companies in those industries dropped on 1999 levels with total capital expenditure falling 8.0 percent to $5.3 billion, said the Census Bureau.

The estimates in the 2000 report are based on data collected from a survey of 44,494 companies with employees and 15,000 businesses without employees. Full details of the survey, including copies of the survey form and results broken down into 132 industry sectors, are available on the Internet at .

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Show Comments