Chart of the Week - Capex Capers
Surprising surge in capex in 2023 as multiple themes converged...
Chart of the Week - Capex Capers
Investment Boom: This week’s chart is actually a panel of charts (click image to enlarge) showing a multi-faceted surge in capex over the past year or so.
I put these together as part of a note on the 2024 macro outlook, as a means of highlighting some of the factors that led to growth being more resilient than expected in 2023.
We saw what basically amounted to an investment boom:
The USA saw a surge in factory building thanks in large part to the CHIPS and Inflation Reduction Acts (both incentivizing the development of industry and R&D in the US — elements of geopolitics, reshoring, clean energy).
Japan also saw a surge in factory building, as it remains an important player in high tech manufacturing and perhaps also a beneficiary of geopolitics.
Europe (and the US + notable elements around the rest of world) saw an uptick in defense sector capex (war is a racket).
Back in the USA there was also a generalized uplift in corporate capex (initially led by tech/tech-related companies, and then more of the old cyclicals).
Globally there was also a surge in renewables and alternative energy investment — and related to that an increased investment by industrial metals & mining companies (both key parts of the energy transition theme).
Many of these themes are longer-term in nature (and interconnected), but with the economic outlook still uncertain, borrowing costs on the rise, bank lending standards tightening, and fiscal incentives already incented — it’s likely going to be hard to repeat the same kind of multi-pronged incremental uplift in investment spending during 2024, even as the pipeline remains bustling.
Aside from being helpful context on 2023, it’s an interesting hard data example of some of the ways in which the macro world is changing as technological progress marches forward, geopolitical sands shift, social-political preferences produce policy changes, and the cycle goes on.
Key point: 2023 saw a multi-faceted global fixed asset investment boom.
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Topics covered in our latest Weekly Insights Report
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Macro Outlook 2024: key themes of 2023, leading indicators, outlook
EM Fixed Income: what the various indicators saying on this asset class
Global Market Update: technical/risk check across regions and markets
Gold: holistic review of the gold price outlook
EM ex-Asia: splitting EM Equities into 2 groups (also a look at EM ex-China)
LatAm Equities: gauging the risks vs opportunities for this group
Renewables & Carbon: renewable energy stocks and carbon price outlook
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