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Good news and bad news: Capital spending is up, but it’s not structural There is no doubt that capital spending is finally climbing. After having fallen in nine of the previous 11 calendar quarters, companies increased their fixed investments at a 14 percent annual Rate in the third quarter, the most in three years.
In particular, investments in equipment and software shot up at an 18.4 percent annual rate — the biggest percentage increase in recent memory.
The urge to splurge is continuing so far in the current quarter. Orders for durable goods rose a hefty 3.3 percent in October — the most in a year. What’s more, core capital goods orders, a good proxy for business investment plans, are now almost 13 percent above year-ago levels.
While this is benefiting some U.S. companies, mainly those in the primary metals, electronics and transportation industries, it’s more of a help to firms based overseas.
This is because most of the equipment that U.S. companies buy these days — especially computers — is built, at least in part, offshore.
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More Good News
The Consumer Confidence Index Increases Ten Points in November
The Conference Board’s Consumer Confidence Index registered another gain in November, increasing ten points. The index now stands at 91.7, up from 81.7 in October. The Present Situation Index increased significantly, registering at 80.1, up from 67 in October and the Expectations Index rose to 99.4 from 91.5.
“Consumer confidence is now at its highest level since the Fall of 2002,” says Lynn Franco, director of the Conference Board’s Consumer Research Center. “The improvement in the Present Situation Index, especially in the jobs component, suggests that consumers believe a slow but sure labor market turnaround is underway. The rise in expectations is a signal that consumers will end this year much more upbeat than when the year began.”
Consumers’ assessment of current business conditions improved significantly in November. Those saying jobs are “hard to get” declined to 29.5% from 33.7%. Those saying jobs are abundant increased to 13.2% from 11.8%. Consumers appraisal of current business conditions also improved. Those rating conditions as “good” increased to 19.9% from 17.1%. Those claiming conditions were “bad” fell to 24% from 28.1%.
Also, consumers short-term outlook continues to improve. Consumers anticipating business conditions to pick up over the next six months rose to 24.1% from 23.5%. Consumers expecting the opposite declined to 7.1% from 11%.
The employment outlook is still somewhat mixed. Those anticipating more jobs to become available in the next six months declined to 18.2% from 19.6%. However, those expecting fewer jobs to become available decreased from 17.6% from 20.4%. The proportion of consumers anticipating an increase in their incomes rose to 19% from 16.9%.
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