February factory orders rose 3%, and January's level was revised upwards by 1%. Orders are now at a new all-time high, and have risen 2.7% in the past year. Factory orders last summer were quite weak, but they have now rebounded convincingly, thus removing one of the few sources of doubt about the economy's ability to continue to grow. Even after excluding defense orders (see chart above), orders are up 3.8% in the past two months and 3% in the past year. Slowly but surely, the economy continues to improve on the margin.
In this next chart I've added the S&P 500 index, which has had a pretty good correlation with the changes in factory orders. I think this shows that the stock market is on much firmer ground these days than it was at its 2000 peak. Back then, equity valuations had clearly overshot the fundamentals. Today, equity valuations are improving very much in line with improvement in the underlying economic fundamentals. The recovery and the rally are for real.
87th percentile = much firmer ground? http://advisorperspectives.com/dshort/updates/PE-Ratios-and-Market-Valuation.php
ReplyDeleteAccording to NASDAQ, a 72.6% increase in defense orders was the cause for February's manufacturing uptick, while chemicals, machinery and computers were a drag on manufacturing -- let's face it, manufacturing in the US is dead except for defense-related manufacturing -- not a single cellphone is manufactured in the US today except defense-related -- likewise, not a single consumer computer is manufactured in the US except for defense-related systems -- the military-industrial complex in the US does not make for a successful national economy -- I am more terrified of military-industrialists than I am of Al-Qaeda -- the preeminence of the military-industrial complex in US manufacturing is no cause for optimism, but rather extreme pessimism for the future of our nation -- the US is a military-industrial empire and nothing more -- that terrified me to the core...
ReplyDeleteAccording to NASDAQ, "The spike in military spending could represent the government's effort to place orders ahead of across-the-board spending cuts that kicked in March. It continues an up-and-down pattern for the industry" -- more at:
http://www.nasdaq.com/article/us-factory-orders-up-30-in-february-20130402-00639#ixzz2PKbRRfc2
"According to NASDAQ, a 72.6% increase in defense orders was the cause for February's manufacturing uptick..."
ReplyDeleteScott's first chart does not agree with you.
If you read the actual report, Table 2, line #3 says new orders "Excluding defense" were up 2.4% from Jan-Feb.
Scott, what did you think of David Stockman's article on the economy, Fed induced bubble, and the impending collapse?
ReplyDeleteBTW, I like the good Dr's new profile picture. I'm now 0 for 2 on my predictions.
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ReplyDelete@Unknown, you make a good point -- I should have looked at the actual reporting instead of relying upon the NASDAQ commentary -- the report you linked is persuasive of Scott's argument about manufacturing growth.
ReplyDelete