Before I update this morning’s personal income and spending data, I wanted to briefly note some significant news in yesterday’s report on manufacturers new orders. (I’ll discuss the important leading metrics from the GDP report next week.)

New orders are one of the long-time components of the index of leading indicators. Typically (but not always!) they peak 3 to 9 months before a recession:

(Click on image to enlarge)

Because they are noisy, I usually don’t pay a lot of attention.

But yesterday was significant, because the manufacturing sector of the economy has been flat to mildly recessionary for over a year. For example (not shown), industrial production has not made a new high in 16 months, and the ISM manufacturing index has shown contraction for over a year as well.

But yesterday core capital goods orders (red in the graph below) made a new all time high. Total new orders were flat for the month, but were one of the three highest readings ever, and the three month average (not shown) also made a new all time high:

(Click on image to enlarge)

One of the big issues for this year is whether, with the resolution of supply chain disruptions in the rear view mirror, the effects of higher interest rates for the past 2 years finally bite manufacturing, construction, and general goods consumption at the same time. Yesterday’s report on new orders suggests that the impact on manufacturing may be  abating. If so, this is very good news.

More By This Author: