Wednesday, October 28, 2009
One way businesses invest for the future is through capital goods orders (aka capex). Capex has risen smartly this year, probably for several reasons: 1) the decline last year was so severe that it was probably overdone, 2) businesses believe that there is hope for the future, and 3) corporate profitability is improving. Through September, Capex was up at a 10.8% annual rate since the freefall of last year ended last January, and up at a 8.1% annual rate since the low of last April. By either measure, capex is doing much better in the current recovery than it did following the 2001 recession. This makes sense given the severity and depth of the decline last year, but it is also an important confirmation of the fact that we are now in a recovery and things are improving and are likely to continue to improve. Capex is the seedcorn of future productivity, after all.
Posted by Scott Grannis at 9:00 AM