June Durable Goods Report Supports Strong Growth View

June Durable Goods Report Supports Strong Growth View

July 27, 2005

Today’s June Durable Goods report was stronger than dirt. As you know, I have been arguing that the economy is growing strongly, especially small companies who are benefitting from the gusher of bank and non-bank business lending going on. This report adds more wood to the fire.

New orders were up 1.4% in June, following May’s 6.4%. Excluding cars and airplanes it was up 6.4%. Best of all, computers and electronic products increased 8.6% with communications equipment up even more than that. Along with today’s very favorable telecom reform bill announced by Senator Ensign, there are signs that US telecom capital spending is starting to wake up. Defense capital goods increased 16.9% for the month!

Inventories fell in May as well, which suports the case for continuing strength. Finally, all revisions to the May data are in the direction of stronger growth.

Growth and profits will continue to surprise the street. I am fully invested. Still like the small caps.

JR

John Rutledge

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