Friday, November 20, 2009

Capital Spending

The Lehmann Letter ©

Everyone wants to know, “When will the economy gain momentum?”

Residential construction and motor-vehicle production remain lackluster.

So does capital spending.

New Orders for Nondefense Capital Goods

Click on image to enlarge)

Recessions shaded

The chart shows that new orders for nondefense capital goods (machinery and equipment) fell sharply in the recent recession. They’re down to where they were at the bottom of the dot-com bust. The latest report – for September – is a low $53.5 billion. You can see from the chart that this is no improvement from the recession’s low.

Full employment requires full production. That can’t occur without a strong gain in capital expenditures.

(The chart was taken from [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)

© 2009 Michael B. Lehmann

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