30 May 2024
KEY POINTS
President Joe Biden’s administration enacted three policies across 2021 and 2022 which provided a fiscal boost of around $1.5tn, creating incentives for long-term investment
Recent investment spending has remained robust, defying usual cyclical patterns and the impact of higher interest rates. It is difficult to disaggregate investment intentions from trade and geopolitical tensions and supply chain security, but corporate investment intention surveys are consistent with a boost to investment from these policies
We illustrate the scale of the investment increase and show how overseas investors have also increased investment in the US, likely in part in response to these policies
November’s election may affect this outlook. Yet, we believe a second Biden term would not see material adjustment. Equally a Donald Trump administration may not necessarily repeal all these policies, at least to the extent expected by some
The onset of the pandemic saw the US endure a period of remarkable economic turbulence but it has since transitioned to a phase of unexpectedly strong growth. One factor underpinning this trend has been the somewhat unusual, acyclical nature of investment spending. Far from exacerbating broader swings in the economy and falling sharply in the wake of higher interest rates – the traditional response – investment spending has remained solid. Several factors have likely contributed to this, including a post-COVID-19 rebound, the need to strengthen supply chain security and a broader desire to onshore, nearshore or indeed friendshore. But we believe part of this marked improvement in US investment spending is the $1.5tn of infrastructure spending set out across 2021 and 2022 by President Joe Biden’s administration.
In this paper, we attempt to quantify the scale of improvement we have seen in investment spending over recent years. We identify a material boost to investment in structures, with a large share of construction spending associated with growth in the computer and electronics sector. We then consider whether this increase is endangered by the upcoming presidential election. We consider the impact that different electoral outcomes could have on the outlook for investment spending.
