R&D Spending Declines First Time in Decade

Corporations are reluctant to spend money, even research and development notes the Wall Street Journal article R&D Spending Drops at Major Firms

Research and development spending at major companies declined last year for the first time in more than a decade, according to a survey by management consulting firm Booz & Co. But R&D as a percentage of revenues was up slightly from a year earlier because revenues dropped at a faster rate than R&D spending.

Booz makes an annual study of the 1,000 publicly traded companies globally that spend the most on R&D, based on their public disclosures. The consulting firm, which has studied data going back to 1997, said 2009 was the first year to show a decline in total R&D spending among these companies.

The cuts last year were concentrated in auto, computing, electronics and industrial companies, some of the biggest spenders.

"The world-wide recession finally caught up with the world's top innovation spenders in 2009," the Booz report says, adding that "the most forward-looking companies will likely move quickly to restore the R&D cuts they made in 2009."

Total 2009 R&D spending by the companies surveyed declined 3.5% from a year earlier to $503 billion. But that worked out to 3.8% of 2009 sales, up from 3.5% in 2008.

Apple last year spent about 3.1% of its sales on R&D, or about half the typical level for computer and electronic companies, said Barry Jaruzelski, a partner at Booz, and yet Apple's R&D appears to be far more effective than that of many rivals.

The Jobs number came in hot today although the unemployment rate was flat. This should not be too surprising as ADP, TrimTabs, and Gallup all suggested a surge in October hiring as did recent ISM reports.

I will have more on jobs in just a bit.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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