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Factory orders continue very strong

I'm not trying to be a cheerleader for the economy, since I'm very much aware of all the headwinds out there. But I can't help posting this chart and commenting on the strength of factory orders, especially now that the world has adopted a very gloomy view of the outlook for the U.S. economy (as embodied in record-low 0.9% 5-yr Treasury yields). New orders received by U.S. manufacturers rose 2.4% in July, more than the consensus expected. Orders are up 13.9% over the past year, and they are up at a very strong 15.5% annualized rate year to date. To be sure, orders are still below their pre-recession highs, but at this rate we'll see new highs before the year is out. There is no denying the manufacturing sector has experienced a V-shaped recovery, even though there is still plenty of idle capacity remaining to be utilized. It's been a slow recovery overall, but it remains a recovery nonetheless.

And for good measure, I'll add this chart of commodity prices (a diversified basket of 27 commodities including energy, industrial metals, precious metals, agriculture and livestock), which shows a pretty decent 8% rebound from the recent (August 9th) lows, and prices which are only 5% off their all-time highs. Together, these charts strongly suggest that the pessimism has been overdone, and the talk of a double-dip recession is misplaced.

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