Encouraging news is always welcome in trying times. Lucky for us, such news arrived in early August. Capital project spending among large US firms is up. Who would have guessed that spending would be increasing in uncertain economic times, but big-ticket capital expenditures such as equipment, real estate, and technology are picking up.

Everyone from PepsiCo to General Motors to Alphabet Inc has been emptying their pockets on capital expenditures. The bet is spending on said expenditures in uncertain times will optimize inventory and eventually expand operations. Capital expenditures are up 20% from 2021 and the stock market is taking notice. While the S&P 500 is still down 13% for the year it has rebounded by the same amount (13%) from its mid-June low. Many analysts point to capital expenditure spending as a major reason stocks haven’t completely crumbled. The simple preference by CEOs to spend rather than hoard money is a sign of optimism.

While we’re all living in a clear recessionary environment with GDP now having contracted for two straight quarters, job gains have been strong and the unemployment rate is still low, considering the circumstances. Expenditure growth is being spearheaded by the industrials, information-technology, and communications-services sectors. Alphabet is spending on their servers to the tune of $6.8 billion. This is up over $1 billion compared to last year. GM is moving full spend ahead in electric vehicle infrastructure spending earmarking $2.1 billion for the initiative. In 2021 they spent just $1.5 billion.

From a cash perspective, S&P 500 companies held approximately $1.6 trillion on their balance sheets (end of Quarter I). On the consumer goods side, Pepsi is pushing to have its products flush and appropriately supplied in all stores. Some of this is optimism for increased demand moving forward, but others point to a sizeable amount of firms sitting on stockpiled cash from the early days of the pandemic. Another interesting phenomenon taking place is “reshoring.” This is the opposite of offshoring, with firms returning production plants to the US in response to the persistent supply-chain challenges we’ve endured over the past two years.

Meanwhile, as to be expected, not everyone is behaving the same. Intel, for example, cut its capital spending forecast. Facing its biggest revenue decline in over a decade, the chip maker is tightening its belt. Others are simply holding onto cash, preferring to remain on the sidelines for now. Things are beginning to shape up again which means a third consecutive quarter of negative growth is not likely for the time being.