Diane Swonk, Chief Economist
Oct. 28, 2009 – 8:00 a.m. CT
Factory Orders Rebound...More Needed
Durable goods orders rose at their fastest pace in 18 months in September. The 1% gain, however, only partially offset the 2.6% decline in August.
Automobile dealers scrambled to restock inventories in the wake of the drawdown that was experienced during the Cash for Clunkers program. Gains outside of transportation and defense, however, were also encouraging. Computers, in particular, showed an increase despite aggressive price cutting. This is particularly important for business investment and could signal a modest improvement in business confidence.
Other pockets of strength included metals and machinery, which could be following in the path that exporters have cleared in recent months.
The Bottom Line: Tomorrow we will get our first glimpse at GDP for the third quarter, which will be the first substantive positive for the economy in almost two years. That said, any gains we see in the second half are more likely to be due to an absence of bad news than an emergence of good news. We will need a lot stronger increases in factory orders and hardcore investment to see this recovery gain any real traction in the year ahead.
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