Elliot Clarke, Research Analyst at Westpac, suggests that as we move through the middle of the year, downside risks are beginning to threaten is the outlook for business investment in the US.
Key Quotes
“Trade frictions between the US and other nations are the ‘headline threat’, but the partial data point to broader concerns. Core durable orders suggest that momentum in equipment investment is plateauing, and non-residential construction investment growth still remains modest versus history.”
“From the available financial detail: intermediated credit demand is best characterised as ordinary; and large corporates seem to be continuing to focus on capital structure management rather than expanding capacity. If these trends persist, then disappointing business investment growth through the second half of 2018 and into 2019 is a significant risk for the US’ outlook.”
“On the uncertainties associated with trade, this week it was pleasing to see the Trump administration back away from tighter restrictions on Chinese firms investing in the US and US high-tech exports to China. For geopolitical stress to subside, negotiation is a necessity; and for this to occur, there needs to be room for compromise.”
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