Advanced Economy Investment Spending to Carry Heavier Burden

John Robertson

PortfolioDirect

A rebound in the importance of investment spending in advanced economy output expected by the International Monetary Fund will be critical to the fortunes of the mining industry over the coming five years. The half yearly World Economic Outlook released on Tuesday by the IMF showed the investment contribution to GDP in emerging economies as having stopped rising (see first chart) while the investment contribution in the advanced economies is expected to push higher, albeit from historically low levels, in 2015 and beyond. Relying heavily on private sector decisions, advanced economy investment spending is more discretionary and potentially variable than emerging economy development spending. Not surprisingly, when the investment contribution is rising, the metal intensity of overall output is increasing and raw material usage rates are at their strongest. This connection is highlighted in the second chart showing global steel production and changes in the investment intensity of global GDP since 1980. Other factors are also at work but variations in the investment contribution make an important difference to the momentum of raw material consumption growth.


John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...

Expertise

No areas of expertise

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.

trending on livewire
Get the best of Livewire by signing up to our popular daily newsletter