KEY DATA: Durables: -1.2%; Excluding Transportation: +0.4%; Capital Spending: -0.5%; Sentiment: -2.2 points; Claims: -13,000
IN A NUTSHELL: “Businesses may have paused in their capital spending in October, but they are still investing heavily.”
WHAT IT MEANS: With the passage of a corporate tax cut becoming more possible, the likelihood is that future business capital spending should be strong. While there was a drop in investment in October, the trend this year is still up solidly. A sharp drop in Boeing’s aircraft orders created the decline. In contrast, vehicle orders surged. This sector has been up and down, but with demand really strong the past couple of months, it should continue to help push the economy forward. There were also increases in demand for machinery, electrical equipment, computers and communications equipment. Given the breadth of the gains, I guess you can say that this is another number where the headline was misleading.
Consumer sentiment eased a little in November. The University of Michigan’s index fell as both the current conditions and expectations were down roughly the same amount. Still, consumer confidence is up 5% over the year, a pretty solid gain.
Jobless gains fell back to more normal levels last week after having increased the previous two weeks. That said, it is clear from the level that the labor market remains quite tight.
MARKETS AND FED POLICY IMPLICATIONS: As we go into the Thanksgiving Day weekend, it is clear that the economy is in good shape. Household confidence is up this year as is the stock market. Basically, if you are working and invested, you have a lot to be thankful for, no matter what your political preferences. And with the tax bill cutting taxes so significantly for many large companies, it is likely that after-tax earnings will be better next year and firms will probably be passing that on through increased dividends. However, it is doubtful they will want to lock themselves into higher labor costs by raising wages, as the administration seems to think. That said, there should be decent hiring as well. On that note, to everyone:
Have a happy and healthy Thanksgiving weekend!