Weekly Economic Briefing

Animal spirits returning?

14 February 2017

Global Overview

  • Capital goods data are pointing to a pick-up in global capex, primarily driven by developed markets. Survey data further confirm improving investment intentions; however, policy uncertainty looms over the outlook.
  • US business investment has been improving as the energy sector recovers and expectations of favourable corporate tax reform spur more firms to invest. Government policies will determine how long this recovery lasts.
  • Eurozone investment has been on an improving trajectory, but political risks will shape the capex outlook in 2017. UK investment will likely weaken over this year as consumption slows and trade uncertainty weighs on business capex.
  • Strong external demand, particularly in the tech sector, has improved the capex outlook in Japan and developed Asia. US tech investment, even more than imports, tends to drive the cycle, so a continued US recovery will be crucial.
  • Emerging markets capex will improve, driven by a resumption of energy investment following a multi-year drought. The improvement is not uniform, however, as economies are in different phases of their capex cycle.
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US

The conditions are falling into place for a recovery in business investment in 2017. Government policies will determine how long the recovery lasts.

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UK

Business investment has been a bright spot over recent years. How will uncertainty over the short term economic outlook and longer-term relationship with the EU affect future capex plans?

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Europe

After a bumpy ride in the wake of the crisis, Eurozone investment has been growing. Conditions are favourable for this to continue to strengthen, but deeper reforms are still needed.

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Japan & Developed Asia

Strong external demand and a recent correction in inventories should support investment growth in developed Asian economies.

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Emerging Markets

EM investment has been improving, primarily driven by the Chinese housing cycle and higher commodity prices. Further reforms are needed to meaningfully boost EM capex.

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Standard Life Investments’ Global Strategy team provide regular analysis of the key economic data that has been influencing financial markets.

Available on a weekly basis, the Weekly Economic Briefing takes a detailed look at the global economic issues that have been impacting our investment strategy. The regional approach aims to provide an easy-to-navigate guide to the most recent developments in the global economy.

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