Infrastructure Investment, GDP Growth, And U.S. Bond Yields

The release of the latest GDP data brings with it updates to a couple of key trends in government investment, infrastructure spending, and longer-term GDP growth rates. The latest data does little to change the picture, but it certainly highlights what are some key trends for investors. The slump in government investment has arguably been a factor in accentuating the longer-term decline in economic growth in America, and with the longer-term GDP growth rate now bottoming out, any movement in policy here could have big implications for the medium-term growth outlook, and as I show below, equally big implications for where bond yields go next.
The points to note on US government investment and long-term GDP growth trends are:
- US government fixed asset investment remains around record lows as a percentage of GDP.
- The decline in government investment seems to mirror the long-term decline in US economic growth.
- More recently, the decline in long-term GDP growth rates looks to have bottomed, and this lines up with the bottom in US government bond yields.
- Private investor interest in infrastructure assets appears to be growing, which is important given the decline in government investment spending.
1. US Government Investment Trends: With the latest round of GDP data for Q1, it's a good opportunity to update this chart which tracks the level of US government investment. And well, not much has changed. In the post-war boom period, government investment... Read more