The long slide of commodities prices is taking its toll on corporate spending, it seems: global expenditure is predicted to shrink by at least 10 per cent this year, according to new research from rating agency Standard & Poor's (S&P).
Spending is expected to continue falling well into next year, according to S&P’s forecast, before stabilising in 2017.
Energy and mining companies struggling with oversupply and low prices are leading the plunge: the sector accounts for nearly 40 per cent of global capex, and its spending is expected to decline 14 per cent this year.
The Bloomberg commodities index recently hit a 13-year low, with BG recently joining other oil giants in responding to a sliding oil price by announcing spending would be slashed by 30 per cent.
S&P’s Gareth Williams, the report's author, commented:
Global capex is struggling to make headway in the face of steep spending cuts from commodity producers. These cuts are likely to continue until 2017, given intense cash flow pressures wrought by falling prices, uncertain demand, and plentiful supply in many commodity markets
While commodities are dragging spending down, other industries are actually rising. S&P predicts that, excluding energy and materials, capex will actually rise eight per cent in 2015 – the first positive growth in three years.
The industries driving this growth are IT, telecoms, automotives and healthcare.