Implications: Forget about the headline drop in overall orders in September. It was all due to the transportation sector, which is extremely volatile from month to month. Every other major category of orders increased in September. Durables excluding transportation were up 1.7%. This is the largest gain in six months, showing the US is nowhere near a recession. Although shipments of "core" capital goods, which exclude defense and aircraft, were down 0.9% in September, the decline follows four straight monthly gains, including a sharp 3.1% jump in August. In the past three months, these shipments are up at a 10% annual rate. Moreover, orders for core capital goods hit a new all-time record high in September and are now fully recovered from the recession. In addition, unfilled orders for these goods are approaching a new record high. In other words, shipments of core capital goods are likely to remain strong. Corporate profits and cash on the balance sheets of non-financial companies are both at record highs. 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, which measures manufacturing activity in mid-Atlantic states, remained at -6 in October, the same as September. Last week, chain store sales were up 4.1% from a year ago according to Redbook Research, 2.4% according to the International Council of Shopping Centers. In other words, while consumer confidence plummets, consumer spending continues to grow.
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Posted on Wednesday, October 26, 2011 @ 9:47 AM
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