A capital spending boom is underway in America and around the world, driven by changes in U.S. fiscal policy, rising corporate profitability, record levels of corporate cash, and a synchronized period of global economic growth. This unfolding capex drive will bolster relative returns in several of MRP’s capex-sensitive themes for the next several years.
The first quarter saw aggregate capex up a record 24% YoY, according to Bank of America Merrill-Lynch, and estimates by factory purchasing managers project a jump of more than 10% for the entire year. Prior projections in December 2017 had that number at 2.7%. The Philly Fed Manufacturing index has also risen to its strongest level in years as readings for new orders in May soared to 40.6 from 18.4. Manufacturers anticipate sales will rise 6.6% this year which, along with greater pricing power, will improve profitability . . .