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Factory orders--another V-shaped recovery




This chart shows New Orders for U.S. Manufacturers. The chart follows the pattern that characterizes nearly all recoveries: the steeper the recession, the stronger the recovery. The pattern has been confirmed empirically, and it was first conceptualized in 1964 by Milton Friedman as the "Plucking Model" of growth. New orders in the past year are up over 10%, and that marks a faster pace of recovery than the one that followed the relatively mild 2001 recession. Of course we are still well below the previous highs, but a rapid recovery such as we are seeing here and in many other areas of the economy all fit together. Importantly, this is all likely to have a synergistic effect, continuing to push the broad economy higher despite the fierce headwinds of faux-stimulus policies and aggressively accommodative monetary policy. At the very least, the economy wants very much to return to its former level of activity, and to accomplish that requires a lot more growth, more profits, and more jobs; all of which we are likely to see in the next year or so.

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