Thursday, March 24, 2011

Capex has slowed a bit, but still healthy

Capital goods orders declined in January and February, leaving orders about flat for the past six months. But the level of orders in February was still 10% above the level of a year ago. Whether the past two months represent a meaningful decline in business investment, a weather-related blip, or a pause after very strong growth in the second half of last year remains to be seen. With other indicators (e.g., the ISM indices, regional Fed surveys, and manufacturing production measures) pointing to ongoing strength in the production side of the economy, I'm inclined to think this is a temporary slowdown, not unlike others that have occurred in the midst of business cycle expansions.

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