The Commerce Department report showed a robust contribution from business investment, which rose more than 6 percent. That seemed at odds with Thursday’s Census Bureau report that nondefense capital goods orders, excluding aircraft, fell 0.1 percent in March and that preliminary results from earlier months had been revised lower.
Baker explains why there’s no contradiction here at all, but naturally I prefer showing it in chart form (I’ve removed recessions to make the chart easier to read):
There are two things to note. First, growth of 6.1 percent is not especially robust. It’s OK, but it’s been higher than that plenty of times. Second, it went down in Q1. What’s more, as Baker explains, this mostly tells us about investment decisions made at least a year ago. To get a read on current levels of corporate optimism, you want to look at orders for capital goods:
There’s just no there here. Business investment is at normal levels; it went down a bit in Q1; this has nothing to do with current corporate decisionmaking anyway; and orders for capital goods have been pretty lethargic since the tax plan passed. Let’s check back in a year, OK?