The Lehmann
Letter (SM)
Business new
orders for machinery and equipment fell in April and have not grown in the last
three months. It's a bad sign if that plateau extends through the summer.
This letter
has spoken of a bifurcated economy: Housing flat while everything else expands.
If business investment in plant and equipment also flattens, that would
reinforce housing's drag on the economy.
Look at the
chart and you will see a great deal of noise in the data. Business's new orders
for machinery and equipment are volatile because they include aircraft orders
which fluctuate sharply from month to month. But you can see that new orders
must break through the $80 billion ceiling to exceed the pre--recession peak.
Only then will we know that business capital expenditures are leading the
economic expansion.
Today's
bulletin from the Census Bureau reported $70 billion in new-equipment orders
for April:
That's not
encouraging, but could be attributed to the noise in the data mentioned above.
New Orders for Nondefense Capital Goods
(Click on
chart to enlarge)
(Recessions
shaded)
This
statistic is worth following. It doubled in the 1980s and doubled again in the
1990s. It failed to do that from 2000 to 2010. We can breathe much easier when
it passes $80 billion and then climbs through $100 billion.
We will
closely follow this report in the remainder of the year.
CORRECTION: Thanks to John Pak for pointing out that that sentence above link should refer to $billions, not $millions.
CORRECTION: Thanks to John Pak for pointing out that that sentence above link should refer to $billions, not $millions.
(To be fully
informed visit http://www.beyourowneconomist.com/)
© 2012
Michael B. Lehmann
No comments:
Post a Comment