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Business Investment Growth Has Likely Peaked


US factory orders impressed vs expectations in June, with the final readings of durable goods data seeing a decent uptick from the preliminary figures as well (see bullet at 1012ET).

  • But like many areas of the US economy, the report - while very strong - pointed to an incipient slowdown from peak growth seen in 1H 2021.
  • After Y/Y rises of 27% and 24% in April and May, respectively (largely base effect driven of course), Y/Y growth in core capital goods orders (ex-aircraft and ex-defense) slipped to 18.2%.
  • The 26.3% Y/Y rise in Q2 real business equipment investment growth looks likely to be as good as it gets as well - core orders tends to lead this series with a 4-5 month lag.
  • Overall growth will still be robust in coming quarters, but bond markets are as ever forward looking, and the recent flattening of the Tsy curve is consistent with growing expectations of a material slowdown.

Source: Census Bureau, BEA, MNI

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