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  Durable good orders decline 1.3% in August, but ex-trasportation orders up 2.0%
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Implications:  Another day, another nail in the coffin for the double dip.  Ignore the headline decline in orders for durable goods; it was all transportation, which is extremely volatile from month to month.  Every single other major category of orders increased in August: computers/electronics, industrial machinery, metals – both primary and fabricated – plus electrical equipment/appliances.  Meanwhile, shipments of "core" capital goods (which exclude civilian aircraft and defense) increased 1.6% in August – the seventh consecutive monthly gain – were revised up substantially for July (to a 0.1% gain from a previously reported -1%), and are up 13% versus last year.  Business investment in equipment is poised to increase substantially over the next couple of years.  In the past 14 months, capacity utilization in the industrial sector has risen from 68% to 75%.  In another year, we could easily be at the long-term average of 80%.  This is happening because of both continued economic growth and falling capacity, as the capital stock depreciates.  Meanwhile, corporate profits and the cash assets of nonfinancial companies are near record highs.  So businesses have both the motive and opportunity to buy more equipment.  Finally, a political consensus is moving toward letting companies use full expensing for investment in the year of purchase.

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Posted on Friday, September 24, 2010 @ 10:08 AM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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