And Now Factory Orders Are Showing A 'V'


Calafia Beach Pundit, who is a retired economist from Western Asset Management, highlights the V-shaped recovery in U.S. manufacturing orders.

The recovery in orders has been faster than during the previous recession, which is following textbook economics:


The chart follows the pattern that characterises nearly all recoveries: the steeper the recession, the stronger the recovery. The pattern has been confirmed empirically, and it was first conceptualized in 1964 by Milton Friedman as the “Plucking Model” of growth.

At the very least, the economy wants very much to return to its former level of activity, and to accomplish that requires a lot more growth, more profits, and more jobs; all of which we are likely to see in the next year or so.

A take-away we’ll add is that orders are already back to about 2005’s level, so while they haven’t taken back their recent peak yet, they are already substantial.

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