Wednesday, March 24, 2010
Capital goods orders—a good proxy for business investment—rose 1.1% in February, and are up at an annualized rate of 13.4% since their low of last April. As the chart shows, capex is rising at a faster rate in this recovery than it did following the 2001 recession. Business investment is still very depressed, as are a lot of things, but activity seems to be coming back on line at a faster-than-normal clip these days. That's exactly the way the economy should be behaving, according to Milton Friedman's Plucking Model of growth: the deeper the recession, the faster the recovery.
Durable goods orders—a broader classification which includes capital goods plus orders for aircraft and defense-related goods—were also up in February, and have risen at an annualized rate of 13.8% since last April. Both measures reflect a relatively strong investment climate, and, by inference, a reassuring rise in business confidence. All augur well for future growth.
Posted by Scott Grannis at 7:56 AM