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Capex remains on a solid path

March 05, 2021

graph depicting longest streaks of consecutive sequential increases in core capital goods orders

Source: Census Bureau

While consumer spending has ebbed and flowed in recent months in reaction to the course of the pandemic and government lockdowns, business investment has been a steady source of ballast. Capital spending advanced by 22.9 percent and 14.0 percent, respectively, in the third and fourth quarters of last year and looks to be on track for another double-digit gain in Q1. Yesterday’s factory orders report showed a 1.8 percent move higher in core capital goods shipments in January, a ninth consecutive increase and the strongest since October. Core shipments are now up by a booming 15.9 percent on a three-month annualized basis. Moreover, the orders data suggest that the pace is unlikely to slacken much in the quarters ahead. Core capital goods orders took a bit a breather in January, rising by 0.4 percent, but this after eight straight sequential increases of at least 1.0 percent. The nine upticks in a row overall marks the longest such streak in the more than five-decade history of the series. A rising order book now means more production later and adds to the evidence that the economy at large is well set up to soar as this year progresses.

Claims edge higher

Initial unemployment claims rose by 9,000 last week to 745,000. This was still better than expected after the massive drop in the prior week and came in spite of a weather-driven jump in Texas. Labor market healing has played out in fits and starts in recent months, but it is a good bet to pick up steam going forward as the pandemic continues to recede and restrictions on business activity continue to be rolled back. Job growth should be a major driver of economic performance across the remainder of the year.

Daily Trivia

In a 1957 survey, what innovation was cited by 90 percent of U.S. firms as the chief boost to worker productivity?

Previous Question

Due to its strategic position on a major body of water and at the gateway to a rapidly growing region, through what city did more than 10 percent of the world’s rail traffic pass at the end of the 19th century?

Answer:

Chicago

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