The combination of a healthy US consumer segment, higher government spending on infrastructure and social programs, and increased corporate capital expenditure (capex) could lead to higher growth over the next few years for the US economy. We believe growth will be broader-based and focused on improving supply chains, automation to tackle dependence on a tight labor market, and emerging areas of the market to address climate risk.
This is in stark contrast to the last decade or so since the 2008 Global Financial Crisis, which was characterized by low growth and monetary stimulus coupled with government policy and regulatory uncertainty.
The post-COVID-19 economy in the US has been driven by consumer spending. However, we expect this to change as we move into 2022.
While the savings rate remains strong, the US consumer has spent their way down to a more normal level of savings from the post-pandemic historical peak. The US consumer will need to take on debt if the recent consumer-spending trends are to continue. We also expect to see a shift from spending on goods to services as the reopening of the economy continues.
Companies Set to Invest More Due to Low Cost of Capital
The capex cycle being experienced in the US is noteworthy; it’s been a number of years since companies have had the confidence to deploy long-term capital. Instead, excess cash was used to buy back shares, which provided a short-term boost to valuations but lacked the ability to compound.