When the Federal Reserve lowered interest rate targets early in January, the poor Christmas season and the collapse of consumer confidence was uppermost in their minds and policy guidance documents. The unexpected rebound in consumer confidence last month has sharply diminished fears that the consumer will stop spending in the next few months. Instead, the problems seem to be mounting for corporations. They still believe technology is a good value that can significantly create efficiencies.
Most corporations still plan to spend large increases on capital.
However, their dwindling confidence has stopped the execution of those spending plans. A year ago, shipments of durable goods were growing at double digit rates before adjustment for deflation. Orders were growing in the teens as everyone sought gains from the new technologies. Any weakness in orders was caused by the inability to timely ship the requested goods. Last week, the February durable goods report painted a remarkably different picture.