Recent surveys from the various manufacturing surveys run by private data providers and regional Federal Reserve banks have been pretty strong. For instance, the Markit flash Manufacturing PMI for the United States released earlier this week hit its highest levels in almost 4 years. Today, the KC Fed Manufacturing composite (which covers factories in the western half of Missouri, Oklahoma, Kansas, Nebraska, Wyoming, Colorado, and northern New Mexico) beat expectations handily, recording a reading of 29 versus 20 expected by economists and 26 in April.

One area of weakness, though, has been capex plans. In the chart below we show the diffusion index for planned capex across the four regional Fed indices (Kansas City, New York, Philadelphia, and Richmond) that have been released so far for May. The average of these 4 peaked at a record level in February, with a net 36.1% of companies on average across the 4 reporting increased capex spending plans over the next six months. Since then, however, it’s been a one-way trip lower. The May reading of 27.0 is still very, very strong by historical standards but it’s falling quickly. Probably not the end of the world, but the very robust expectations from Q1 weren’t sustainable and are now mean-reverting.

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