Machinery Industry
While the credit crunch and slower economic growth dampens private sector spending, fiscal expenditures appear ready to play a counter-cyclical role. China announced a rather large stimulus package in November. <p> Also, the U.S Congress passed a stimulus package that President Obama signed on Tuesday, February 17, 2009. The bill contains money that will flow into infrastructure spending. <p> The only issue is the timeframe of the spending. For example, according to CBO estimates, of the $27.5 billion in the budget for highway spending (Title XII - Transportation and Housing and Urban Development Highway Construction), $9.625 billion will be spent by the end of FY2010. This equates to 35% in the first two (FY) years and the remaining portion realized through the (FY) years 2011-2016. <p> Amid the current global economic slowdown, there may be a silver lining. Central bankers have gone from raising interest rates and fighting inflation to slashing rates and flooding the system with liquidity. These monetary conditions may eventually help to stabilize commodity prices. We would become more constructive on commodity stocks such as Freeport McMoRan, on signs reflation measures were working their way into the real economy.
March 1, 2009 | Filed Under Analyst Opinions
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