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A surge in machine buying?

A March 7 story in the Wall Street Journal and a March 9 press release from the Packaging Machinery Manufacturers Institute suggest that American businesses may be getting ready to spend some serious cash on packaging machinery.

The article in the Journal refers to “huge cash hoards” that companies have on hand and quotes a number of analysts and experts who believe that a sizeable portion of that cash will be spent on investments in machinery. Among these experts is J.P. Morgan economist Bruce Kasman, who has revised his first-quarter forecast for growth in spending on equipment and software from 5% to 15%.

Far more packaging-centric data comes from PMMI. According to its January “How’s Business” indicators report, quotations for packaging machinery went from 48.5 points in December 2004 to 70.9 points in January 2005. In this report, an index of more than 50 points indicates an expansion in the period and an index of below 50 indicates a slowdown in activity, according to the monthly input of PMMI member companies. This report collects data on four business indicators: general business conditions, new orders, shipments, and quotations/proposal activity on a weekly basis.

PMMI also points out that the end-of-year PMMI Quarterly Market Trend Report indicated a 12% increase in members’ machinery bookings through the end of 2005.

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