Will business pick up the economic slack created by the housing drag? That’s the big question separating economic optimists from the cult of the bear. Well, today’s factory report on the production of durable goods answers that question with an emphatic yes.
Spurred by record profits and low tax rates on capital, business other than the ailing Ford and GM looks really strong. Major categories of new orders, shipments, and unfilled orders for non-defense non-aircraft capital goods surged in July at a double digit annualized pace. Over the past year, orders are up 13 percent, shipments increased 10 percent, and backlogs rose 14 percent. These are very big numbers.
Economic pessimists and recessionists will have to go back to the drawing board. Incidentally, 3rd quarter GDP, reported just before the November election, will likely come in within the 3 to 3