Dear Reader,
The financial services firm UBS recently released a report about the state of the economy, and they are optimistic. "
Retreating Covid, buoyed household balance sheets, and accommodative monetary policy should propel solidly above-trend U.S. growth the next few years," economists led by Jonathan Pingle wrote.
In their forecasts for 2022 and 2023, UBS economists predicted that hiring would continue at a high clip, supply chain pressures would ease, and the inflation rate would eventually cool to around 2% by the end of next year.
One topic that was continually highlighted throughout the UBS report was Capex Intentions.
Short for capital expenditures, Capex represents what companies are spending for the equipment they need to conduct business.
"Capex intentions are running at multi-decade highs," the economists observed. We can see that a lot of businesses are investing in themselves.
And it's not just the big guys that are exerting their dominance.
A recent survey identified that 31% of small business owners plan to make capital outlays in the next three to six months. This is the highest since August 2018.
The crazy thing is, these significant Capex outlays mainly represent economic activity that has yet to be recognized.
One potential problem is how quickly manufacturers can get this equipment to buyers.
We already know delivery times are already incredibly long. As a result, the backlog of unfilled orders for this capital equipment has never been this high.
The bright side is that even though the economic activity isn't happening now, there's a good chance that it is coming down the pipeline.
For me, all these signs point towards a bullish market. In short, while the inability to deliver may be weighing on growth today, it should boost growth in the future.
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