Implications: A Plow Horse report on orders for durable goods. After plummeting 8.1% in July, durable goods rose 0.1% in August. This is not much of a rebound but is the fourth increase in the past five months and orders are up a healthy 13.7% from a year ago. Much of the gain in the past year comes from the volatile transportation sector, but not all of it; orders ex-transportation are up 7.6% from a year ago. Shipments of "core" capital goods, which exclude defense and aircraft, rose 1.3% in August. Plugging this into our real GDP model suggests growth at a 1% - 1.5% annual rate in Q3. There is a still a risk of a negative number for Q3 growth, but it's a low risk. The best news in today's report was that unfilled orders for core capital goods rose 1.1% in August, hitting a new record high. The news on unfilled orders supports our optimism about an eventual acceleration in business investment. Monetary policy is loose and, for Corporate America, borrowing costs are low and balance sheet cash and profits are at or near record highs. Meanwhile, the obsolescence cycle should goad more firms into updating their capital stock. In addition, the recovery in home building should generate more demand for big-ticket consumer items, such as appliances. That's why Home Depot is doing so well. Expect more plow horse growth in the months ahead. In other recent news, the Richmond Fed index, which measures manufacturing sentiment in the mid-Atlantic, declined to zero in September after spiking to +14 in August. The Richmond index has been unusually volatile lately, bouncing between positive and the zero to negative range every month for the past four months.
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