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Global Real Investment Surges as Spending Bonanza Continues

Global economies recover from the COVID-19 pandemic as spending and investment continue to grow. Governments, corporations and households are on a spending spree.

Policymakers around the world responded to the COVID-19 pandemic the only way they knew how – by delivering huge monetary and fiscal stimulus. For the first time, all governments and central banks delivered fiscal and monetary stimulus at once.

Because the pandemic-led recession crippled all economies, the response was uniform. Now that vaccines are proven to work, and the economies are reopening, people start spending again.

But it is not only the consumer that spends and fuels the economic recovery. The governments and corporations are on a spending spree, too, with no end in sight.

On a Spending Spree

America leads the way. Capital spending by corporations is going through the roof, estimated to rise by an annual rate of 15% on machines, factories, and software.

Global investment is expected to be 121% above pre-pandemic levels, according to an estimate by Morgan Stanley. Corporate spending is expected to be led by tech giants, planning to deliver a boost in capital spending by 42% in 2021 alone.

On top of that, the US government just released its 2022 fiscal year budget plan. The budget is expected to rise to over $6 trillion next year, and to reach above $8 trillion by 2031.

The pandemic changed consumer behaviour in an unprecedented way, creating new opportunities for both existing and new businesses. Online shopping increased dramatically during the pandemic, and the trend is here to stay.

Retailers increased their online presence and gave up on physical locations more. Thus, tech companies are benefiting from delivering solutions from storing data to software and everything needed to facilitate the shift to online.

Households still have plenty of resources to spend. Savings remain elevated, as shown by the Q1 data from France, for example – the savings rate remains very elevated, at 21.8%.

The pandemic triggered an unprecedented global crisis. But it also stimulated innovation as the world was racing against the clock. Vaccines are the result of investment in research and development, innovation, for example.

To sum up, spending and investing are forecast to rise. The pandemic led to new opportunities and the one that moves faster benefits from the first mover’s advantage.

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