$7tln of Investment Incoming? Don't Hold Your Breath.
While headlines imply the admin secured huge new investments from companies and foreign countries that will drive big growth numbers, hopes for an investment-driven boom are likely to be disappointed.
The new admin has collected trillions in promises for new investment in the US from companies and foreign countries. While these announcements make for splashy headlines, the actual economic impact is likely to be much more limited.
It’s no surprise that a hoped for surge in business investment has become a real focus of many after it bailed out what would have otherwise been a pretty weak read on final demand in the 1Q25 GDP report back to highs of the cycle.
Many folks have pointed to the surge in announced new projects by the new admin as a key lever that can keep the expansion going even with some moderation in HH demand. Projects have totaled near 7tln.
On the corporate side these announcements have barely moved the needle in analyst expectations of CAPEX, suggesting they were either already expected or not believed.
The announced country-level is also being called into question as well, given that the announced figures far exceed the pace of investment is orders of magnitude of the rate over the last 10 years.
And would require a vast upsizing of the invested capital in the US relative to current exposures and levels of investment that would be multiples of SWF assets or enormous relative annual GDP.
Taken together it looks like maybe all these projects could provide a modest upward support to economic activity (few tenths of GDP), but the headlines touting trillions of dollars are pretty much implausible.
If anything the timeliest reads of business investment suggest that the 1Q surge is fading as uncertainty has surged in recent months, an indication that despite all the hype, investment is unlikely to drive an expansion ahead.
Its such a good smokescreen/bait with the headlines.
So I don’t disagree that there is a desire to achieve this outcome and that it’s actively being worked on by the admin and others. I don’t think on a long term basis, the deals would work because I question that there is all of this dormant capital available. Even if it’s possible, who is to say that those countries won’t be impoverished too much in the short term to a realize a net benefit in the long term. The deals could essentially unwind if countries go into economic hardship and need to secure survival.