According to the U.S. Commerce Department, corporate profits in the country hit an all-time high of $1.659 trillion in the latest quarter. This came as a surprise to me given that many thought the wheels of the U.S. economy had fallen off. The Commerce Department states that the profits have improved over the last seven quarters. If this trend is to continue, another recession coming our way is highly unlikely.
As businesses continue to amass profits, they should feel secure enough to make major investments like investing in new machineries and facilities. However, this has not happened yet.
In terms of investments in new facilities and expansions, projects are still far below the normal average. According to the data obtained from Conway Data, this year up to the end of September 2010, we saw 1,133 projects (599 New & 534 Expansions). In the same period in 2009, activity was slightly higher with 1,538 projects (915 New & 623 Expansions). And in the same period in 2008, activity was lower with 1,055 projects (646 New & 409 Expansions). Review the chart below for the comparison of the projects between January and September in the past three years.
In terms of investments, things have continued to look grim as investment levels in 2010 were less than half of what they were in 2008 between January and September. The combined investments (new and expansion projects between January and September) was $50.7 billion in 2008, $40.3 billion in 2009, and $22.8 billion in 2010.
Below is the list of some of the industries that are the most active in 2010:
Something to notice within each of the industries listed above is the locations where the projects have happened. The first industry of interest is the Semiconductor and Electronics Components Manufacturing (NAICS 33441). About half of the projects in this sector are solar projects. Historically, most of the solar and semiconductor projects tended to concentrate in the West Coast and the Southwest, however the maps shows that there has been a considerable number of projects in the Southeast and the Midwest. A $30 million investment by Mage Solar, a German solar company, in Dublin, Georgia is one example of such investments. Review the map below for the projects in this sector:
View Semiconductor 2010 in a larger map
Another industry of interest is the data center industry, which falls under NAICS 51821 (Data processing, hosting, and related services). Again, like the semiconductor and the solar cells industries, much of the activity in this sector is concentrated in states like California and Washington, the birth place of several IT companies. However, most companies, new and old, are now looking at states like North Carolina and Virginia for their data center expansions. See the map below for details.
View Data Center 2010 in a larger map
As the above figures and charts suggest, the improvement in corporate profits has not yet translated into increased investments. This means those organizations, be it real estate firms, site selection consultants or economic development organization, have to work doubly harder to target these limited investment opportunities.