Wednesday, April 29, 2015

Economic Summary for the week ended 27th April 2015

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 utilization in the region starts to tick upwards from its mid-2013 trough, companies will have to consider finally making the investment 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 profile recovery, and European earnings look to be gaining strength. Given the Eurozone’s rising utilization, relatively healthier corporate earnings, and easier lending standards, investors might like to pay attention to capex trends in the coming quarters.

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