Research Briefing | Aug 3, 2023

US industry ROI boosted by technology spending

US private sector return on investment (ROI) is near 20-year highs, boosted by commodity price strength and business spending on technology. The rising return from previous investments is one factor recently supporting US industry capex in the face of higher costs of capital.

What you will learn:

  • ROI in resource-oriented sectors, such as agriculture and energy, has enjoyed higher output pricing but just as importantly has benefited from a greater degree of capital discipline.
  • In addition, a variety of sectors have been allocating more of their capex budgets to technology products, such as software and R&D, which yield a higher ROI than purchases of structures or other types of equipment. This is due to the technologies’ ability to boost an operation’s scale in sales, shown by a higher asset turnover. Leading examples in manufacturing are refineries, food and beverage, and transportation equipment, while in services they include wholesale, retail, and entertainment.
  • The attractive ROI, accompanied by robust reinvestment rates, point to further gains in business profits over the course of expected recession and recovery. Beneficiaries include providers of IT systems and software, internet and cloud services, and manufacture of chemicals and plastics.
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