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Take the divergence between consumer vibes and hard numbers. As Gillian Tett noted last week, nearly half of Americans surveyed by TransUnion believe the U.S. is already in a recession, but retail sales remain defiantly strong. The equivalent on the corporate side is how buoyant business investment has been, despite CEO pessimism, rising interest rates, unstable stock markets, commercial real estate concerns and even a minor banking crisis that forced many lenders to reduce their expenses. In a report released today (public link here), Goldman Sachs estimates that capital spending has grown 3.5% over the past year. And while analysts expect a slowdown, Goldman predicts capital spending will remain strong enough to boost overall economic growth above its previous forecasts. Here are his main points.
Here last year, the CHIPS Act has played an important role in keeping capital spending strong. Alphaville emphasis below: — Business investment has grown a solid over the past year, defying consensus forecasts for Job Function Email Database the sharp declines typically seen in recessions. However, weak business sentiment, banking stress and falling office investment threaten to slow capital spending growth going forward. In this note, we assess the outlook and discuss how these three headwinds will impact capital spending. — First, forward-looking survey measures of capital spending expectations have fallen to their lowest levels since the financial crisis and are currently in contractionary territory. However, hard indicators on spending plans have not fallen as sharply, and a tracker based on specific capital spending hard data, which has historically been a better predictor of realized capital spending than a soft data equivalent, has remained in expansive territory throughout this year.
Second, the Fed's H.8 release indicates that bank lending to businesses has stagnated in recent weeks. The slowdown in bank lending poses a serious threat to structural investment, as commercial real estate is particularly exposed to bank lending, and academic research suggests that alternative financing options may be several hundred basis points more expensive. . But reassuringly, small businesses report in the NFIB survey that they have not had more difficulty accessing credit since the bank failures. — Third, the fundamental backdrop for some segments of structural investment remains weak. Office investment is likely to fall further because office vacancy rates have continued to rise sharply, and guidance from energy companies suggests oil and gas investment will continue to decline. However, the strong investment in domestic manufacturing encouraged by the CHIPS Act and the Inflation Reduction Act should offset, at least in part, these obstacles.
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發表於 2024-3-7 18:24:35