No Liquidity Trap, US Economy Picks Up Steam

From the Wall Street Journal Blog (bold highlights mine)

U.S. businesses are unsure where the economy is headed, but that has not stopped them from going ahead with capital spending projects. The dichotomy echoes consumer behavior, which finds consumers feeling pessimistic but still shopping.

The big difference: unlike consumers who have seen little wage growth, the U.S. business sector has piles of money to buy new equipment, modernize plants and retrofit office space. Now they just need to add workers.

Shipments of non-defense capital goods excluding aircraft jumped at a healthy 16.7% last quarter. That was the largest gain in five quarters and suggests third-quarter gross domestic product growth was solid (GDP data will be released Thursday).

In addition, new orders for capex goods increased last quarter, meaning business investment will keep growing into 2012.

Company executives are approving spending plans, while at the same time growing more uncertain about the U.S. economy.

The third-quarter Manufacturing Barometer done by business consulting firm PwC shows a plunge in the percentage of U.S. manufacturers who feel good about the economy.

Kontra popular analysts whose incantations have been about an alleged liquidity trap that has been plaguing the US economy, the empirical data above disproves this highly fallacious but popular theory.

To add, signs of economic strength seems to defy the 'animal spirits'.

Instead, as what I have been saying, exploding money supply growth appear to be permeating into the US economy where the next possible risk could escalating inflation.

Gold prices appears to be signaling this, where a break above the 50-day moving averages would imply that the bull market in gold remains intact and would likely reaccelerate.

And if US consumer price inflation is to ramp up, then the attendant symptoms would be a recovery in the broader spectrum of commodity markets and the stock markets.

Nevertheless, we still need to see the feedback loop effects of the unfolding events in China and the Eurozone.