PERSPECTIVE3-5 min to read

Is business investment boosting productivity?

A story in charts

30/12/2021
chris-article

Authors

Christopher Lewis
Head of Investment Strategy, Wealth Management

Companies were routinely criticized for rewarding shareholders rather than investing in new plant and equipment in the years before the pandemic. This is starting to change. Corporate investment – or Capex – rebounded sharply last year.

Corporate investment has rebounded far more quickly than normal…

chart-one-chris

Source: UBS

Companies are investing to meet booming demand. They are also relocating production lines closer to home – or “reshoring.” This helps make supply chains more resilient and, with higher production costs in China, makes economic sense.

Technology – and in particular automation – can help companies protect margins and profits in a period of rising inflation and labour shortages.

As populations get older, especially in developed economies, greater productivity becomes an even more important driver of economic growth.

Before the pandemic, digital technology was already leading to improving productivity. The modernisation of ageing plant and equipment should help to extend the trend.

...which could lead to faster US productivity growth...

chart-two-chris

Source: UBS

...especially as more businesses bring processes back onshore

Number of US companies announcing reshoring, by quarter

chart-three-chris

Source: UBS

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Authors

Christopher Lewis
Head of Investment Strategy, Wealth Management

Topics

Economics
Perspective

Cazenove Capital is a trading name of Schroders (C.I.) Ltd which is licensed under the Banking Supervision (Bailiwick of Guernsey) Law 2020 and the Protection of Investors (Bailiwick of Guernsey) Law 2020, as amended in the conduct of banking and investment business. Registered address at Regency Court, Glategny Esplanade, St. Peter Port, Guernsey GY1 3UF, (No.24546) . Schroders (C.I.) Limited, Jersey Branch is regulated by the Jersey Financial Services Commission in the conduct of investment business. Registered address at 40 Esplanade, St. Helier, Jersey JE2 3QB, (No.31076).

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