Capital Markets: Observations and Insights Autumn 2019
The Good, the Bad, and the Ugly
ECONOMY
The Bad – Confidence Waning
• Economic policy uncertainty is extremely high and is weighing on business confidence
• As a result, capital expenditure growth has moderated significantly
…Weighing on Capital Expenditures
Uncertainty Is High…
350
140
15%
300
120
10%
100
250
5%
Capex YoY
80
200
0%
60
-5%
150
40
-10%
100
20
50 Global Economic Policy Uncertainty Index
-15%
0
-20 CEO Economic Outlook
-20%
0
2002
2004
2006
2008
2010
2012
2014
2016
2018
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: Baker, Bloom & Davis, Business Roundtable, Bureau of Economic Analysis, and FactSet. Capex growth is U.S. real nonresidential gross private domestic investment. The Global Economic Policy Uncertainty index is a GDP-weighted average of national economic policy uncertainty indices for 20 countries, which is derived from own-country newspaper articles that discuss economic policy uncertainty in that month. The Business Roundtable CEO Economic Outlook Index is based on a quarterly survey of member CEOs’ plans for hiring and capital spending, and their expectations for sales, over the next six months. Taking these factors together, the survey signals the direction of the U.S. economy.
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