Thursday, February 25, 2010

Capital goods orders tick down but still strong

Durable goods orders jumped 3% in January, much more than expected. But if you subtract transportation orders, they fell more than expected. My favorite version of these numbers (non-defense, ex-aircraft orders) is shown in this chart, which I consider to be a proxy for business investment spending. While the January number was below expectations, the December number was upwardly revised by about $1 billion, so the net change was a small negative. In any event, this series is notorious for its month-to-month volatility. Abstracting from the monthly noise, business investment is up at an annualized rate of 15.5% since hitting a low last April. That's a strong rebound by any definition. Business investment like this will create a good base for future productivity gains and eventually a return to new hiring.


LIL said...

Keep drinking that Kool Aid.

Benjamin Cole said...

There has been a mini-spate of not-great news of late. Probably it is a hiccup. Asia is over the recession already.

No doubt there is will be more tough sections of road ahead. But no recovery is a straight line.

People are still bearish. In some regards, that we have had a recovery at all is remarkable. This was a deep recession, and in some quarters there is deep disregard for the current administration, and even obstructionism.

With the advent of the web, there is actually a class of people beating the doom-drums, and who even seem to wish a recession now for political reasons.