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Capex still strong

Capital goods orders apparently came in below expectations, but prior months were revised higher, and faulty seasonal adjustment factors are still muddying the waters. The 3-month moving average of orders solves the seasonal problem, and the result, as shown in the chart, is that orders continue to move higher at a pretty impressive pace. Over the past year, capex is up 15%, and over the past six months, orders have risen at a 10.5% annualized rate. A quick visual comparison of the rebound from the recent recovery compared to the rebound after the 2001 recession says it all: today things are getting better, faster, than they did in the years following the 2001 recession.

Of course, it is still the case that orders haven't broken new high ground for the past 10 years. But it is nevertheless encouraging that orders are rising at an above-average clip, since that means that business confidence is being restored. Capital goods orders are also the seedcorn for future productivity gains, and that means the outlook for future economic growth is improving.

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