Exports Not Bombs

Shobhana Chandra leads with the bad news:

Orders for American-made durable goods unexpectedly fell, led by a slump in military equipment that overshadowed increases in business investment.

But could there be a silver lining?

Demand for cars, planes and other items made to last several years fell 1.7 percent in September, the Commerce Department said today in Washington. At the same time, orders for and sales of computers and machinery, a proxy for capital spending, advanced. “Manufacturing will have slow-but-steady growth through the end of the year,” said Adam York, an economist in Charlotte, North Carolina, at Wachovia Corp., which had forecast orders would decline in September. The drop in total orders was “not quite as weak as the headline suggests.” Record export demand will keep manufacturing growing, helping prevent the housing-market recession from sinking the broader economy, economists said. The gains in business investment prompted Morgan Stanley and Macroeconomic Advisers LLC, a St. Louis-based research group, to lift their estimates of third-quarter growth.

In other words, the drop in Federal defense purchases might soon be matched by increases in business investment and exports. In other words, a rise in national savings that allows for a reverse crowding-out effect where the sum investment and net exports increase by the same amount? One can only hope!