Chances are, 3M plays a bigger role in your life than you realize.
You’re probably aware that the Minneapolis-based manufacturer’s array of 50,000-plus products includes Scotch tape and Post-It notes. It’s also, however, the firm behind industrial-strength adhesives for cars and airplanes, reflective gear for runners and highway markers, and films that render smartphone and tablet displays stronger and brighter.
All of which shows why financial analysts view the company as a sort of bellwether, much like the shipping firms UPS and FedEx. So, if many of corporate America’s leaders are upbeat after a GOP-led tax overhaul, 3M Chief Executive Officer Inge Thulin’s perspective lends his optimism about economic expansion greater weight.
“I, personally, only think we have seen the beginning of it,” Thulin told the Washington Examiner. “With all the changes in policies and more cash becoming available, over time, more growth will come.”
The company is so optimistic that it is funneling 6 percent of its sales, or close to $2 billion, into developing new products this year and boasted a 16 percent increase in its quarterly dividend.
“Research and development is the heartbeat of 3M,” Thulin said, and while the 115-year-old company is making its own investment in growth, the more relevant trend may be increasing spending by its customers, who have more cash at their disposal after Congress cut the top corporate tax rate to 21 percent from 35 percent.
Even more expansion may be fueled by President Trump’s proposal to put $200 billion of federal money toward infrastructure improvements in the hope of driving a $1.3 trillion investment by state and local governments and private businesses.
Infrastructure work is the initial phase of an economic cycle that progresses through manufacturing, regulation, retail, and eventually healthcare, 3M’s CEO said, and investing at that point would position the U.S. at the start of a “powerful circle.”
Afterward, “the big infrastructure builder will come in, manufacturing will start, and people will start to invest again,” Thulin said.
Asphalt supplier Martin Marietta Materials, for example, predicted in February that demand would rise this year, thanks to both Trump’s infrastructure plan and former President Barack Obama’s approval of a $305 billion initiative in late 2015.
While work actually slowed after that, due to inclement weather and a deceleration in awards of public contracts, the country’s roads and bridges continued to age, CEO Ward Nye said. Many are in desperate need of repair, he noted, and some of those projects will get done in 2018 and over the next several years.
The tax cut’s outsize benefits for American companies, meanwhile, have already begun to materialize, and 74 percent of the S&P 500 index members that have reported fourth-quarter performance so far are delivering higher earnings than analysts expected.
Many businesses, from JPMorgan Chase to Walmart and Apple, have outlined plans to invest in expansion while boosting salaries for their lowest-paid workers. That has the potential to increase consumer spending, which accounts for more than two-thirds of the nearly $20 trillion U.S. economy.
Such developments show the overhaul can “add meaningfully to growth for at least the next couple of years,” Federal Reserve Chair Jerome Powell told the Senate Banking Committee during his semi-annual testimony last week. “The bigger question is how much it will add to longer-run growth.”
