Infrastructure is essential but often taken for granted. Pipes carry drinking water to our homes, offices and healthcare facilities. They also carry away sewage and wastewater. Highways, airports, railroads, waterways, roads and bridges allow efficient transportation of goods and make safe travel possible. Energy systems and transmission lines keep the lights on and the stove cooking. Broadband data transmissions systems assure high speed internet access.
On Thursday, President Biden and a bipartisan group of senators announced that progress had been made on the framework for a bipartisan infrastructure plan. Investors were happy to hear it. Randall Forsyth of Barron’s reported:
“…Washington this past week finally took steps to address the nation’s manifest deficiencies in its infrastructure…Perhaps tellingly, the bond market had only a minimal reaction to the prospect of further government spending. But stocks of companies that could see a bonanza of dollars flowing from D.C. had double-digit gains on the week, and the indexes notched gains averaging around 3%, with the S&P 500 ending at a record.”
Financial markets paid less attention to the other “I” – inflation.
On Friday, The Bureau of Economic Analysis reported on the Federal Reserve’s favorite inflation measure, core personal consumption expenditures (PCE). The Core PCE Price Index, which measures prices, excluding food and energy, was up 3.4 percent from May 2020 to May 2021. From April 2021 to May 2021, PCE increased 0.5 percent, which was lower than the previous month-to-month increase.
Yields on 10-year U.S. Treasuries moved slightly higher last week and U.S. stocks had their best week since February, reported Naomi Rovnick and Francesca Friday of Financial Times.
(The one-year numbers in the scorecard below remain noteworthy. They reflect the strong recovery of U.S. stocks from last year’s coronavirus downturn to the present day.)
IT’S HARD TO GET EXCITED ABOUT A "C-".
Since 1998, the American Society of Civil Engineers (ASCE) has been grading infrastructure in the United States. "A" is exceptional, fit for the future. "B" is good, adequate for now. "C" is mediocre, requires attention. "D" is poor, at risk. "F" is failing, unfit for purpose.
The 2021 Report Card for America’s Infrastructure graded 17 categories of infrastructure. The grades were poor enough that, if the report card had been handed to a student to take home, it might never have been delivered to the parents.
The report’s authors stated, “If the United States is serious about achieving an infrastructure system fit for the future, some specific steps must be taken, beginning with increased, long-term, consistent investment. To close the nearly $2.59 trillion 10-year investment gap, meet future need, and restore our global competitive advantage, we must increase investment from all levels of government and the private sector from 2.5% to 3.5% of U.S. Gross Domestic Product (GDP) by 2025. This investment must be consistently and wisely allocated...”
As many teachers have told many students over the years, a poor grade means there is room for improvement. Another "I".
Weekly Focus – Think About It
“There is no greater burden than great potential.”
–Charles M. Schultz, Cartoonist
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