Strongest 2-Month Capital Goods Orders Increase in More than 4 Years

According to data released Friday from the Department of Commerce, orders for non-defense capital-equipment goods excluding aircraft rose 1.5% in March after a 4.3% gain in February. Such core capital-goods orders are considered the best gauge of capital spending by businesses, and are also considered a leading economic indicator. The two-month increase of 5.8% in new orders for capital goods was the strongest two-month gain in more than four years, since the 6.5% two-month increase for December 2004 and January 2005.

Thanks to Larry Kudlow for the alert on this.

Comments

[ArkansasAngie:]

You don't suppose it could be a reversion toward the mean?

Apr 26 11:46 AM

[CautiousInv...:]

The author's data is spot on and supports those subscribing to the green shoots school.

I would simply point out that this category accounts for around 32% of durable goods and is so depressed that small gains are easily translated into material percentage gains.

Apr 26 12:12 PM

[zayttrader:]

Bingo, CautiousInvestor,

If we believe Mark, Larry, et al. DOWN is the new UP.

When a measure is down -6%, then -5%, then -12%(!), a slight increase looks like a big deal. It isn't. YOY, it's still down huge.

Who gives a rip if the 2nd derivative is up. Down is still down!

Apr 26 12:27 PM

[Prudent Man...:]

Percentage gains from a low base? Come on, we are not all idiots.

A reminder of an old truism: Statistics don't lie but liars use statistics. Any scam artist can make the numbers, on a relative basis, prove their point like politicians. This emphasis on relative rather than absolutes can be misleading.

It is not surprising that Larry Kudlow, a Crony Capitalist who doesn't quite understand its difference from meritocracy-centered Free Enterprise and never managed a professional portfolio, would use capital goods orders as an indicator. Pros know, and so does Kudlow (or should) that it is one of the worst indicators of economic activity and because of its inelasticity should be ignored on a month to month basis.

Apr 26 12:29 PM

[HardwoodFlo...:]

Down is the new up. But as someone in business it is easier to operate when things are going up then whent hey are going down. When they are going down, you can't layoff enough people fast enough. You can get your inventory down fast enough, you can't cut costs enough to make up for the top line drop. OK. So what happens when things go up. Well the inverse.

You say, so what we are still not back to where we were. This is true but when you've leaned out your operations to deal witht he worst, and your sustaining, when business goes up 20% it feels pretty daamn good.

We are seeing alot of remodel work. We are seeing new building (done by small mom and pop builders) and homes are selling. Now this is in the mid west- so all you guys who are on the coast don't get mad and call me a liar and the rest. i'm just telling you what we are seeing. I think that the numbers are going to be significant;y better in April than they have been for the past six months for building, housing and remodel- that being said I'm still talking about the midwest.

Apr 26 12:35 PM

[HardwoodFlo...:]

PrudentMan- i can't stand CNBC either. The whole "fast money" things os so obnoxious. "sell the rips buy the dips" It's just idotic. That Channel with all the screaming and yelling is like a bunch of kids.

The whole thing is totally shallow- Bloomberg is much better.

Apr 26 12:37 PM

[bricki:]

This statistic is one of the components of the Conference Board index of leading indicators so the history is there to support the idea of it being a useful indicator when used in conjunction with other factors.

However one has to be careful - these capital expenditures occur for two reasons; support of existing operations and for new projects. My guess is that with the dire situation with obtaining financing the past few months the levels of orders were likely to be below the level needed to sustain existing activity. As the financial markets have stabilized a bit the level of these orders could be increasing just in order to support current activity levels.

This is why this particular indicator by itself is insufficient to predict anything. It needs to be examined closely and bundled together with other factors for it to be useful.

Apr 26 09:52 PM

[Dustinian:]

This is bullish news for those who think the worst has come to an end.

A few more lead indicators supporting that thought, and I will be won over too.

Apr 26 11:45 PM