Memo to Bernanke – its not working!

Capital Goods Orders received by nondefense, non aircraft manufacturers, NEWORDER, monthly, percent change year on year, May 2003 to May 2013

Capital Goods Orders are carefully studied by market analysts since this metric provides critical information about the state of the manufacturing sector.

The chart above shows Capital Goods Orders received by nondefense, non aircraft manufacturers
(NEWORDER, monthly), measured as percent change year on year for the period May, 2003 to May, 2013. In other words, how much these orders have changed each month compared to the same month a year ago. The vertical grey bar represents The Great Recession. For each period I’ve calculated both the average month on month change as well as the number of months this change was less than zero; in other words, Capital Goods Orders were declining.

Up until The Great Recession we see that Capital Goods Orders averaged a 6.3% monthly change from the year before, with Capital Goods Orders contracting for five of forty four months. After The Great Recession Capital Goods Orders averaged a 5.0% monthly change from the year before, with Capital Goods Orders contracting for thirteen of forty six months.

What’s the difference? Post Great Recession The Fed has been intervening massively in the markets, and is currently purchasing some $85B a month of securities (US Treasuries and MBS) in an effort to “stimulate” the economy.

Doesn’t seem to be working, now does it?

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