Wednesday, April 25, 2012

Capital Goods: More Bifurcation

The Lehmann Letter (SM)

This morning the Census Bureau reported that capital-goods orders were down in March:

This letter has always focused on a portion of that report: New orders for nondefense capital goods, a measure of business (not household) investment in new equipment.

The chart shows that these orders have popped up strongly since the recession. This provides more evidence of our bifurcated recovery: Everything but housing seems to be doing well.

March's $73 billion was down sharply from February's $81.6 billion. There is always noise in the data, and this statistic is particularly volatile because of its inclusion of new aircraft orders. So the real story remains: Business capital expenditures have recovered sharply from the recession.

Nondefense Capital Goods

(Click on chart to enlarge)

(Recessions shaded)

But we should pay attention to the chart. Business capital expenditures are supposed to exceed their previous peaks by a great deal. If this series is to do as well as it did in the 1980s and 1990s, it has to move up to the $100 billion range. That's a tall order.

(To be fully informed visit

© 2012 Michael B. Lehmann

No comments: