- by New Deal democrat
While we await tomorrow’s deluge of data (Q3 GDP, personal income and spending, and jobless claims) let’s take a look at the yesterday’s most recent update of manufacturer’s new durable and capital goods orders from yesterday.
This comes out twice a month, as a first estimate and then as a final number for each month. Yesterday’s report was the first estimate for September. And it continued the strong rebound we have seen for over a year.
On a monthly basis, headline manufacturer’s new durable goods orders (blue) increased another 1.8%, while the less noisy core capital goods orders (red) increased 0.5%, to new post-pandemic high in the case of the less-noisy, more-signal latter:
On a YoY basis, the headline number increased 9.9%, and core capital goods orders increased a very sharp 13.5%:
What is interesting about the YoY comparison is that, if we use a paradigm that AI adoption will follow a typical “S” curve of exponential acceleration in growth followed by a similar exponential deceleration in growth” (note, we are talking about the second derivative here), then the fact that the core capital goods growth, while remaining very strong, may have reached peak acceleration at about 15%, then the first sign of the diminishment of the AI story may be near at hand (i.e., still strong growth, but decelerating to under 10% YoY).
Also interesting is that this inflection point of the second derivative may also be operative in the regional Fed new orders indexes that I updated last week. Here again is that graph:
This is noisier, so I look at the three month average, which remains close to its 3+ year peak.
The bottom line is that the AI-data center driven manufacturing rebound is very much intact at present. This suggests that consumer spending and goods-producing employment will also continue to be strong (in the case of the former) or rebounding (in the case of the latter). The inflationary expansion continues.