One of the important figures we follow closely is capex, as it helps inform our outlook on the macroeconomy. By leveraging the capex figures already reported, we see that it is likely to have collapsed by around 10% in 2020 for S&P 500 firms in aggregate. Despite positive news on the vaccine, Q4 is likely to see little additional capex, indicating that firms remain unwilling or unable to invest. By our calculations, the aggregate level of capex spending in 2020 as a percentage of GDP will be around 3% for the S&P 500, among the lowest levels going back to 1990 (the GFC saw capex collapse to 2.9%).
We need more investment to see stronger future economic and earnings growth. When firms hold back investments, they naturally lay the foundation for an eventual inflation overshoot as new and more efficient capacity is not brought on line.
Source: Bloomberg, Unigestion. Data as at 12 February 2021.
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