Businesses gear up to start spending

Mitchell Hartman Mar 4, 2010

Businesses gear up to start spending

Mitchell Hartman Mar 4, 2010


Kai Ryssdal: We talked about retail a little bit on the broadcast yesterday. And how there are signs consumers are starting to spend again. There was confirmation of that with this morning’s retail sales report. Despite the big storms and heavy snow in some parts of the country last month, February was actually pretty good. Overall sales were up 4 percent, Nordstrom and Macy’s were the big winners.

And the spending continues outside the narrow confines of retail. There’s some new evidence businesses are feeling flush, too. Marketplace’s Mitchell Hartman reports.

MITCHELL HARTMAN: Turns out, while the rest of us have been spending less and saving more, so have businesses. Analysis by the Wall Street Journal finds non-financial firms in the S&P 500 are holding nearly a trillion dollars in cash and short-term investments: up a third from a year ago.

PAUL DALES: Companies have slashed head counts, cut costs dramatically.

Paul Dales at Capital Economics says as sales pick up, the money’s rolling in.

DALES: They don’t really just want to sit on their cash, because it’s not doing anything for them, it’s not earning any money.

First stop: mergers and acquisitions. Some companies are using their cash to buy up competitors and related businesses. They’re also giving it back to shareholders in buybacks and dividends.

And they have increased investment spending: rebuilding inventories, buying new computers and equipment.

But will they hire more workers?

JARRAD HARFORD: Yeahhhh, that’s the big question.

Jarrad Harford teaches finance at the University of Washington. He says flush corporate balance sheets could lead to more “Help Wanted” ads.

HARFORD: It provides that cushion to firms that are nervous about starting to hire again and expand.

But, he says, a big pile of cash isn’t going to spur hiring on its own. Companies still want to see sustained sales growth before they commit.

And Paul Dales of Capital Economics warns, many companies may not need to add new workers or production lines for another year or more.

I’m Mitchell Hartman for Marketplace.

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