20140912-NATIXIS-United_States__No_bright_future_without_investment__17页_981kb

Summary of FLASH ECONOMICS ECONOMIC RESEARCH (September 12, 2014 - No. 658)

Core Content

This report discusses the state and future outlook of corporate investment in the United States, focusing on its recovery post-crisis and the challenges it faces. Despite a strong rebound following the financial crisis, corporate investment has not fully recovered, with most sectors still below pre-crisis levels. The energy sector and a few exceptions have shown stronger performance.

Main Points

• Corporate Investment Recovery:
  Corporate investment rebounded in 2010 but has since stagnated, with only limited growth in 2013 and Q1 2014. The investment rate remains below pre-crisis levels.

• Fiscal and Monetary Policy:
  Fiscal uncertainties have decreased, and monetary policy is gradually normalizing. Despite this, the report suggests that corporate investment could strengthen in the short and medium term due to improved growth prospects and favorable financing conditions.

• Financing Structure:
  The US corporate sector has seen a rise in profitability and net savings since the crisis, but these have not translated into a marked increase in investment. This is partly due to companies using excess savings for share buybacks and dividends rather than reinvestment.

• Sectoral Analysis:
  Investment in most sectors remains below pre-crisis levels, except for the energy and transport sectors, which benefited from the "energy revolution" (shale gas and oil extraction). Other sectors like wholesale trade and information technology have seen some improvement, but overall, the manufacturing sector and others are still lagging.

• Productivity and Capital Accumulation:
  Productivity gains have slowed, and the accumulation of productive capital is still below its historical average. The average age of capital stock has increased, indicating aging infrastructure and equipment.

• Investment Drivers:
  Several factors are expected to support a short-term pick-up in investment:

  • Reduction in uncertainties (political and economic)
  • High self-financing rate
  • Favorable financing conditions (low interest rates, normalized spreads)
  • Substitution of labor for capital is currently slowing, which may ease in the future
  • Capacity utilization is improving, especially in sectors affected by falling energy prices and increased demand

Key Information

• Investment Deficit:
  The overall investment rate remains below the pre-crisis level, with only a few sectors showing notable recovery.

• Profitability and Net Savings:
  The profit rate has stabilized around 12.3% of GDP since 2012, with a notable drop in Q1 2014 due to a tax adjustment. Net savings have increased, but at the expense of wages.

• Current Account Deficit:
  The current account deficit has decreased significantly since the crisis, reflecting a shift in the financing structure from net borrowing to net lending.

• M&A Activity:
  M&A activity has picked up, especially in Q2 2014, driven by favorable financing conditions and regulatory changes. However, this is not a full recovery across all sectors.

• Long-Term Outlook:
  The long-term outlook for investment is less optimistic due to a decline in potential growth and a slower depreciation rate. Potential growth is expected to range between 2.0% and 2.5% due to demographic trends and reduced productivity gains.

• Conclusion:
  While the long-term investment momentum is expected to weaken, the short-term outlook is more positive. The report suggests that corporate investment could strengthen in the coming quarters due to improving conditions and reduced uncertainties.

Supporting Charts

• Chart 1: Shows the shift from net borrowing to net lending in the household sector.
• Chart 2: Demonstrates the reduction in the current account deficit.
• Chart 3 and 4: Illustrate the dynamics of corporate savings and investment.
• Chart 5 and 6: Highlight the shift in value added distribution and the impact of productivity on investment.
• Chart 7-12: Provide sector-specific investment data and trends.
• Chart 13-18: Show the depreciation rate and capital accumulation trends.
• Chart 19-20: Reflect potential growth and productivity trends.
• Chart 21-28: Demonstrate market valuations, financing conditions, and M&A activity.

Disclaimer

• The document is confidential and intended for specific recipients only.
• It is not an independent research report and is not compliant with legal requirements for investment research independence.
• The information provided is for informational purposes only and does not constitute personalized investment advice or an offer to buy/sell.
• The content is based on publicly available information and does not take into account specific regulations or tax rules applicable to clients.
• The report is not subject to any restrictions on distribution, but recipients are advised to check local laws and regulations.