Capital spending

Dreary figures for April business outlay follow a weak first quarter, recent report shows.

Even as consumers open their wallets wider and help dig the economy out of its recent funk, businesses are still pinching pennies.

Capital spending fell 6.2 percent at an annual rate in the first quarter following a 2.1 percent drop late last year — its worst such stretch since 2009 and a big reason the economy nearly stalled in that period, Commerce Department data shows. Recent reports offer little relief in the short term, with orders for capital goods declining 0.8 percent in April.

Business outlays were sluggish throughout 2015, rising 2.8 percent compared to an average 4.5 percent clip during the seven-year-old recovery.

But the investment slump has widened in recent months across a diverse array of U.S. companies and sectors, according to Howard Silverblatt, senior analyst for S&P Dow Jones Indices. Ford cut capital spending in the first quarter to $1.5 billion from $1.8 billion a year ago.

Business spending typically makes up 12.5 percent of economic activity but has an outsized impact on the economy and stock market. Purchases of equipment and software, and the construction and renovation of buildings, create thousands of jobs for manufacturers.

And such investment makes up nearly 30 percent of the sales of Standard & Poor’s 500 companies, says David Bianco, Deutsche Bank’s chief U.S. equity strategist. He expects revenue of S&P 500 firms to increase 3 percent to 4 percent this year and in 2017. Healthy business investment typically would mean at least 6 percent sales growth for the S&P 500, he says.