What's going on?
Data out over the weekend showed companies are spending more than they have done in years, as they equip themselves for this surreal post-pandemic future.
What does this mean?
You’ve got to spend money to make money, and everyone from food giants to chipmaking heavyweights has certainly been doing that: Morgan Stanley is predicting global investment by businesses to be 15% higher this year than it was before the pandemic. That makes sense, as supply delays, chip shortages, and the green revolution are all forcing them to invest in their production capabilities and in-house technology. Throw in pent-up consumer spending, super-cheap borrowing, a bona fide economic recovery, and it’s no surprise CEOs are suddenly much more forthcoming with the company credit card.
Why should I care?
The bigger picture: Compare to the alternative, not the almighty.
A surge in business spending could be just what the global economy ordered, offering a ray of hope that supply chain issues, inflation fears, and the withdrawal of economic support won’t ruin 2022 like some are anticipating. And if nothing else, be thankful we’re worlds apart from where we were after the 2008 financial crisis, when companies’ unwillingness to spend money saw employment numbers and wages stagnate.
Zooming out: The must-have toy of the year.
At the top of firms’ wishlists as they looked to boost production were metals – specifically aluminum, which hit a 13-year high on Monday after rising 15% over the last three weeks. And with China continuing to limit production as part of its drive to reduce carbon emissions – a supply gap that could take as long as five years to fill – that rally doesn’t look like it’ll be over anytime soon.