Business investment continues to rise

New orders for capital goods fell as expected in July (they almost always do in the first month of each quarter), but the 3-mo. moving average (which corrects for this problem) continues to rise. However you measure it, orders are up 10.8% over the past year, they are still rising, and they are closing in on the pre-recession highs. Double-digit growth in business investment is hardly the stuff one would expect to see if the economy were flirting with recession, or if this were a jobless recovery or a New Normal economy, as so many seem to think.

Nevertheless, it continues to be the case that the recovery is sub-par, but it's not entirely the fault of the private sector. It is probably more accurate to say that the private sector is doing a pretty good job of growing the economy despite all the obstacles thrown in its path: e.g., trillion-dollar deficits which have soaked up every penny of record-setting corporate profits in the past two years, and huge increases in transfer payments which penalize work and reward idleness. Today's WSJ op-ed page has two more examples if you fail to see my point: "Rahm's Home Improvement," and Robert Barro's piece (which should be required reading in all Econ 101 classes), "Keynesian Economics vs. Regular Economics." If left to its own devices, the economy would undoubtedly be doing a lot better. 10% annual growth in business investment is pretty darn good, but the drag from misguided fiscal policy puts us in a "two steps forward, one back" mode.