The Durable Goods orders report for November came in better than expected both on the ‘headline’ as well as on the internals, offsetting the very weak reading from the preceding month. Business spending has been a persistent ‘no show’ in this recovery and it is perhaps to premature to declare an end to that trend on the basis of this reading. Instead of making capital investments, companies have been investing record sums into share buybacks.
Buybacks totaled $128.2 billion in Q3, the highest quarterly level since the fourth quarter of 2007, according to a story in today’s Wall Street Journal, with Apple (AAPL), Exxon (XOM), and Pfizer (PFE) as the biggest buyers of their shares in the quarter. Given the stock market’s strong run this year that has pushed the broad indexes into record territories, one is justified to wonder whether the companies are making the most optimal use of their cash.
But if today’s Durable Goods report is a sign of things to come, then it would be representative of a material improvement in the economic outlook.
Merry Christmas to all.
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