Implications: This is not what a recession looks like. New orders for durable goods slipped a tiny 0.1% in August, both with and without transportation. But shipments of "core" capital goods, which exclude aircraft and defense and which the government uses to calculate the business investment part of GDP, increased a robust 3.3% (including upward revisions for July). This is the fourth straight monthly gain for core shipments, which are now at a new all-time record high. They are up 10.8% in the past year and are accelerating, up at a 19.6% annual rate over the past six months and an even faster 22.6% rate in the past three months. Increases in core shipments should continue: unfilled orders are up about 15% versus a year ago. In addition, non-financial corporate balance sheets are strong and loaded with cash earning nearly zero percent interest. Meanwhile, corporate profits are at a record high. As a result, the odds are stacked in favor of a substantial increase in business investment over the next few years. In other recent news, the Richmond Fed index, a measure of manufacturing activity in the mid-Atlantic, increased to -6 in September from -10 in August. Chain store sales were up 4.2% versus a year ago according to Redbook Research and 2.7% according to the International Council of Shopping Centers. On the housing front, the Case-Shiller index, a measure of home prices in the 20 largest metro areas, was unchanged in July (seasonally-adjusted) and down 4.2% versus a year ago. However, prices were up in nine of the twenty areas. The biggest losses in July and the prior three months were where many would expect: Phoenix, San Diego, San Francisco, Las Vegas, and Los Angeles.
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Posted on Wednesday, September 28, 2011 @ 10:18 AM
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