I am speaking most of today but wanted to put in some very preliminary thoughts

1) I was a bit shocked at how low the headline number was but I see change in private inventories is subtracting over 1%. I will have to dig deeper on my interpretation of this. My baseline is that inventories are already fairly tight so this represents business being behind the curve rather than sensing future falls in demand

2) Durable goods growth was strong as expected. This is the auto recovery. Non-durable is still lagging. Need to look into that

3) Non-residential fixed investment is on fire. Equipment and Software is burning it up at a 17% growth rate. Indeed, non-residential fixed investment contributed almost as much to growth as did consumption. Not grew at the same rate as consumption, but the absolute increase in business investment was almost as great as the absolute increase in consumption.

4) Net exports was mildly positive

5) Government was flat


On first glance the internals of the report are very good. In line with what I expected. We can probably count on durables remaining high into Q4 as the auto-rebound continues and I am still looking for a strong uptick in Residential Investment.

An open question is how long this blistering level of Business Investment can keep going. It’s a little crazy at this point. We are still below normal on capacity utilization. Real retail sales have yet to make new highs.

I have no particular reason to think there is going to be a “correction” and indeed if anything the rate of growth should accelerate, but its always disconcerting to make forecast that are so out of the box.

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