NEW YORK —
Companies finally are starting to spend some of the cash they’ve been sitting on, and that could mean a stronger economy and more jobs are on the way.
Industrial companies such as General Electric, Honeywell and Caterpillar have been posting strong financial results in recent weeks and telling investors that orders are strong. That means other large companies are investing in expensive equipment they need to grow their business, economists say.
“We’re on the brink of that inflection point where the economy can really take off,” says Diane Jaffee, a portfolio manager and managing director at the Trust Company of the West. “What’s different now is that the industrial companies are saying there is real demand.”
In the years since the Great Recession, big manufacturers have cut costs, slimmed down their operations, and accumulated cash.
They’ve had to because their customers — other big businesses — were too worried about some part of the global economy to hire people or buy equipment that takes years to pay off.
Political wrangling in the U.S. shut down the government and led the country to nearly default on its debt — more than once — even as the U.S. economy was struggling to improve. At the same time, the enormous European economy was mired in a debt crisis and a subsequent recession.
The economies of the U.S. and Europe are showing steady progress, and while Chinese growth appears to be slowing, it remains strong.
“U.S. gets a little bit better every day. Europe is improving. The growth markets continue to expand and will provide growth during the year even with volatility,” General Electric CEO Jeff Immelt told investors last week.
GE’s results reflected that growth. Revenue from its existing industrial divisions rose 8 percent in the quarter, an extremely strong performance, led by a 12 percent rise in equipment sales. And customers placed some large orders. For example, the South African rail company Transnet ordered 233 locomotives, valued at $700 million, and Air France ordered $1.7 billion worth of aircraft engines. That equipment will be manufactured in the U.S.
Caterpillar reported Thursday that its first-quarter earnings rose 5 percent and it raised its forecast for profit for the year despite difficult times in the mining industry. Its sales to construction, energy and transportation companies improved and CEO Doug Oberhelman told investors the U.S. economy looks promising.
Honeywell’s results were boosted by sales of turbochargers for car engines. It cited strong growth in the U.S., China, India and the Middle East as it raised its outlook for the year. ÿ