Wednesday, July 27, 2011

Capex update: moderate growth


New orders for capital goods fell slightly in June, but the more stable 3-mo. moving average rose 0.3% (this series is notorious for its monthly and quarterly volatility), and is up at a 9% annualized rate over the past six months. Nevertheless, there has been a slowdown in the past year, compared to the rapid growth of the first half of 2010, and this is consistent with a lot of other indicators of moderating activity, and with the slower reported growth of the first and (most likely) second quarters of this year. So there's not much new or helpful information in this series.

8 comments:

brodero said...

As always...thanks for using a 3 month moving average...I only wish the business press would report this data series
that way....

Dr William J McKibbin said...

Observing happenings in Washington, I am pondering whether the Republicans are deliberatly taking the US into default -- if a default occurs, the outcome could actually be good for growth once the dust settles -- a default would likely result in dramatic cuts to government spending in all categories, the specifics of which are almost irrelevant -- said another way, an instant 40-50% cut in government spending would certainly change the economic landscape in the US to favor private enterprise -- companies would be forced to seek growth capital from hard-currency investors overseas, but would likely prevail in that effort as sidelined capital in Asia and the Middle East arrived into the US to buy anything and everything at a deep discount -- corporate paper would probably jump to 10%+ overnight -- however, the unemployment lines would no doubt grow longer with government employees, fixed-income retirees, and unskilled laborers who would become economic refugees -- still, I cannot help but think that private companies that have viable products and services to sell would find themselves swamped with overseas orders that would be denominated in foreign (hard) currencies -- I continue to believe that investors holding dividend and rent paying equities will come out miles ahead of where they are today -- I am not a fan of a austerity or default and would have preferred monetary expansion instead -- however, if America is destined to default at the hands of Republicans who are doing everything possible to cause very deep austerity measures to be implemented, or a national default in lieu thereof, then I suppose equity investors can still win -- those Americans without jobs private enterprise, certifiable skills, or high quality equities (and a government pension does not count as equity) are likely to fall into destitution -- I still hoping the US avoid a default, but if a default occurs, so be it...

brodero said...

A recession in 2012....sounds
like a campaign slogan from the RNC

Benjamin said...

Ron Paul asked an interesting question: What if the Fed buys US Treasuries and just retires them?

Works for me.

Dr William J McKibbin said...

Benjamin, Ron Paul suggestion requires some responsive explanation from the Federal Reserve -- QE2 was simply a swap of Federal Reserve Notes (cash) for Federal Reserve Bonds -- said another way, the Federal Reserve's balance sheet changed not at all -- in the mean time, the US is now paying interest to the Federal Reserve for the bonds they purchased back from bondholders -- so, why would the US government pay interest to the Federal Reserve Bank (?) -- again, Ron Paul is asking a very good question...

Scott Grannis said...

If the Fed "retired" or otherwise eliminated its holdings of Treasuries, it would leave the dollar with nothing to back it up. The $1.6 trillion of Treasuries that the Fed has purchased with QE1 and QE2 would have been truly "monetized," or simply manufactured out of thin air. This would hugely undermine the value of the dollar and could precipitate all manner of unintended and ugly consequences.

As it is, Treasury pays the Fed interest on its Treasury holdings, and the Fed remits its "profits" back to Treasury.

Public Library said...

Scott is correct re Paul. Retiring debt pulls the fundamental anchor right out of the markets floor.

How would you consider any contract at that point safe...

I do agree with Paul's desire to abolish/neutralize the Fed. They (along with other money center banks) are the root of most calamities this century.

Benjamin said...

Okay, let's leave the fig leaf in place. The Fed remits profits back to the Treasury--in other words, the Treasury pays interest to the Fed, and the Fed gives the interest back (money is fungible, remember), and we say the Treasury debt is not retired.

Fine with me--I just hope the Fed buys more Treasury debt, and does not retire it, but rather pays the interest back to the Treasury.

As for inflation--ain't none on the horizon. This is a situation where the theory is not matched by the reality.