In 2013, former US Treasury secretary Larry Summers famously declared that the world’s advanced economies were in a state of secular stagnation, a period of sluggish growth, low-interest rates and an absence of inflation. Today, central banks find themselves worrying about the opposite: the prospect of higher-than-target inflation and the need to keep interest rates higher for longer.
Our work suggests that transformative thematic macro trends will drive global capex spending up by $2.5 trillion per year in a base case scenario and $5 trillion in a high scenario. This translates into a projected 12-24% increase in annual global gross fixed capital formation by 2030.
The emerging capex cycle is underpinned by a multitude of structural drivers, including the shift towards net zero, efforts to enhance supply chain resilience underpinned by persistent national security concerns, demographics, fast-rising defence spending, and public infrastructure spending across the developed and developing world.
The move toward a green economy is the largest component of increased infrastructure investment. BloombergNEF forecasts that investment spending will reach between $2 trillion and $4.5 trillion per annum, by 2030. Defence spending estimates since the Ukraine war have structurally increased by $300 billion to $700 billion pa.
Moreover, it would influence the broader macroeconomic landscape, potentially spurring higher inflationary impulses and sustained increases in bond yields at cyclical peaks. Our research suggests the structural thematic drivers outlined here are durable, substantial, and are likely to play out over many years. While the impact on productivity may take time to materialise, the changes are palpable and poised to exert a tangible influence.