Share watch
Jan 26 2009 by Anthony Peart, The Journal
OVER the Christmas period the FTSE 100 index recorded a strong rally, rising to 4638 points in early January.
However, the new year has started with a bump with investors remaining cautious about the prospects for the coming year given the scale of the economic downturn.
In light of the problems that are being faced internationally, the UK government has mirrored that action taken by central banks around the world and has cut interest rates aggressively over the last four months.
That said, there is a concern that monetary policy is becoming less effective at this stage in the cycle and it may be time for the Government to put plan B into action, and that is to start spending!
Over the last six months a number of governments around the world have announced large-scale fiscal stimulus packages. In many countries there has been an underinvestment in public infrastructure for a number of years and the cracks are starting to show.
The UK water sector is a case in point with investment needed to bring the Victorian sewage system up to scratch, let alone the requirement for additional reservoirs.
This theme is also present in other areas of the economy.
The new spending initiatives will be used to stimulate economic activity by initiating programmes that encourage the improvement of hospitals, roads, railways and other utilities. Indeed, looking across the Atlantic to the US there are measures being put in place to improve the country’s interstate system and the new spending initiatives will not stop there.
The investment theme of infrastructure is not new and it has been mentioned many times before.
Nevertheless, the signposts have been considered, constructed and cemented in place and providing they are pointing in the right direction, the sector may be in the right spot to benefit from the packages that are being put in place by governments around the globe.
Share
