August 3, 2021

Data Insight – Capital Expenditures Recovery?

by Tajinder Dhillon.

Capital expenditure expectations appear to have recovered from pre-pandemic levels in most major regions and are trending upwards according to analyst estimates. Using Datastream Indices, we look at 12-month forward capital expenditure consensus estimates for Global, U.S, Europe and Asia indices. Datastream Indices are comprehensive and capture significant breadth in coverage. For example, the Datastream Global index contains over 7,000 constituents.

Since 2020, analysts have raised capital expenditure estimates by 9.0% in Asia, 5.1% in the U.S., 0.9% for the Global index. The exception is in Europe, where estimates have declined by 18.0%.

For the U.S. index, the 12-month forward capital expenditures estimate is currently $885.6 billion, up 13.8% year-over-year. Elsewhere, estimates are up 33.0% YoY in Asia, 23.6% for the Global index, and -3.0% in Europe.

Exhibit 1 highlights analyst expectations on a sector basis for the U.S. index. Consumer Discretionary and Information Technology remained resilient during the pandemic, as capex estimates barely dipped in 2020 and have accelerated since.

The Datastream U.S. Technology index currently has the largest 12-month forward capex estimate of $156.6 billion, which is up 20.8% YoY.  Elsewhere, Consumer Discretionary capex estimates have increased 41.1% YoY. followed by 24.9% for the Industrials index.

Even with higher oil prices, many energy companies continue to show capital discipline and analyst expectations for future capex remains below pre-pandemic levels. Capex estimates peaked at $125.7 billion in March 2020 and currently stand at $81.4 billion for the Datastream U.S. Energy index.

Exhibit 1: U.S. Capital Expenditure by Sector

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