The Weekly Brief (27 April 2015) - J.P. Morgan Asset Management

The Weekly Brief (27 April 2015)

Contributor Global Markets Insights Strategy Team

Euro area capex as a share of GDP is currently close to its record low. But the pressure to begin making capital investments is mounting. As capacity utilisation in the region starts to tick upwards from its mid-2013 trough, companies will have to consider finally making the investments that they’ve been putting off.

Since the last cycle peak in ‘07-’08, Italy and Spain have seen the greatest fall in buildings spending, while France and Germany saw a bigger drop in transport expenditure. Consider the US post-financial crisis, when US capex rebounded from record lows in 2009 to levels above its long term average. The key driver then was profits recovery, and European earnings look to be gaining strength. Given the Eurozone’s rising utilisation, relatively healthier corporate earnings, and easier lending standards, investors might like to pay attention to capex trends in the coming quarters.

Low cap-ex and high cap-use

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The Weekly Brief - 27th April 2015