Capital Spending Aimed At Loosening Supply Chain Holdups Increasing at US Companies

U.S. companies have been moving up their capital spending plans in an effort to streamline the supply chain snags that have crippled much of the global economy lately, putting aside potential fears about a possible economic recession, according to a report Thursday (May 19) in The Financial Times.

Investors and company executives say they expect to see the longstanding global trend that includes global supply chains and “just-in-time” inventory management after a stretch of time that’s included lockdowns related to the COVID-19 pandemic, Russia’s invasion of Ukraine and increasing tension between the U.S. and China, the report said.

Capital expenditures are up 20% year-over-year among the S&P 500 Index companies that have reported their first-quarter earnings, according to Bank of America data. The share of companies that say they will spend more on capital investments in the future also expected to go up across all sectors other than real estate in the first three months of the year.

“Onshoring or rejigging supply chain risks — that’s a costly phenomenon,” said Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America, in the FT report. “Capex is usually something companies can move around or relax a bit in a constrained environment, but in this case they may have to spend more than they otherwise might.”

Related: Walmart+ Weekend Shows Retail Giant’s Need to Boost Subscription Loyalty as Inflation Rages

Walmart, one of the companies that is planning to ramp up its capital spending in its Q1 earnings report this week, also announced that it will host Walmart+ Weekend, an online-only event June 2-5.

Walmart is looking to gain more critical mass in its subscription business, where it trails peers even in an age where subscription commerce by mass merchants has been taking off. These commerce juggernauts have been enjoying the fruits of consumer loyalty through these programs, as well as larger basket sizes.

The new PYMNTS study, “The Benefits of Membership: Mass Retailers and Subscription,” found that Walmart is the most frequently cited mass merchant with which consumers shopped. Seventy-five percent of consumers shopped there in the past month, but only 21% of consumers have Walmart+ memberships. Conversely, 61% of consumers who made purchases from Amazon are Prime members.