Business investment poised to go up in ’18

Economic growth since the end of the Great Recession has largely come on the back of consumers buying homes, cars and other products.

Now, there are signs that businesses are stepping up their investments as well, says a top executive from Cleveland-based KeyBank.

“Our clients right now are feeling pretty optimistic,” said Christopher Gorman, the bank’s vice chairman and president of banking.

Gorman’s position with the bank puts him in position to know how well the economy is doing. KeyBank operates in 15 states from Maine to Alaska.

Up to this point in the economic recovery, there hasn’t been much investment in plants, property and equipment, Gorman said. On the other hand, businesses may have thought such investments haven’t been necessary until now, he said.

“No one was worried about getting product tomorrow or that it would cost more,” Gorman said in a recent interview while visiting KeyBank’s Columbus market and staff.

Now, there are signs that could be changing, he said.

Labor markets have gotten tight in some areas of the country, and prices for some commodities, such as lumber, are starting to go up. That can motivate companies to invest or to take steps to secure more inventory “if I believe it’s going to cost more

or that you might not have access to it,” Gorman said.

Economic growth increased at an annual rate of a solid 3.2 percent during the July 1-Sept. 30 quarter. Some of that growth came from companies stocking up on inventory.

That’s an indicator of one of two things, said Ben Ayers, senior economist at Nationwide.

“There’s a buildup of inventory because companies aren’t buying things as much. Or businesses are ramping up inventory because they anticipate more production ahead, and I think that’s what’s happening,” he said. “A lot of companies are ramping up production because the economy is growing faster and there’s a lot more demand for products.”

A report by Wells Fargo & Co. also suggests businesses likely will be adding to inventories in coming months.

“Stronger growth in the coming year should lead to businesses adding to inventories over the next few quarters,” the report said. “The pace is not expected to be as jaw-dropping as earlier in the expansion when businesses got out over their skis, then subsequently had to dial their inventory-building back.”

At the same time, consumer confidence remains high, meaning consumers will continue to do their part to power the economy, Ayers said.

“The consumer side still looks good. Consumer confidence is off the chart. They are optimistic and very confident,” he said.

Cuts to business taxes enacted by Congress also figure to help, Gorman said. KeyBank’s customers include small- and mid-sized businesses that pay the current top corporate tax rate, he said.

“It will be good for our

clients,” he said.

KeyBank has 25 branch offices in the Columbus area. The bank ranks as the seventh largest in the Columbus area with 2.3 percent of all bank deposits, according to the most recent data from the Federal Deposit Insurance Corp.

Gorman said the bank is benefiting from a strong economy in the region.

“I like what I see,” he said. “You start with a market where just so much is going on. ... The economy has a ton of momentum.”