INDICATOR: June Durable Goods Orders

KEY DATA: Orders: +3.4%; Excluding Aircraft: +0.1%; Private Investment: +0.9%

IN A NUTSHELL: “Businesses are investing again, another indication that the weakest link, manufacturing, could be starting to come back.”

WHAT IT MEANS: Consumers may not be shopping until they drop, but they are out there spending money. Unfortunately, businesses have not been doing the same and that has hurt the manufacturing sector.

Well, demand for big-ticket items picked up in June. Durable goods orders surged, but much of that was due to a rebound in both civilian and defense aircraft demand. That said, most of the other sectors, including machinery, computers, vehicles, fabricated metals, electrical equipment and appliances, posted solid increases.

There was weakness in communications equipment and primary metals, but that was pretty much it.

Also, the proxy for private investment, which is capital goods orders excluding defense and aircraft, rose solidly after two months of declines. Order books increased a little, an indication that production could start improving.

MARKETS AND FED POLICY IMPLICATIONS: The one disappointing segment of the economy has been manufacturing.

Between the sharp cutbacks in the energy sector and the strong dollar and weak world economy slowing export growth, this key component of growth has not been shouldering its share of the burden.

That could be changing. It looks like the oil patch may have bottomed as the rig counts are starting to rise.

The Dallas Fed’s Texas Manufacturing Index has been improving and could actually start turning positive soon. Indeed, expectations are surging. If the Texas manufacturing sector, which is heavily influenced by energy, is coming around, it makes sense to expect the rest of the country, which hasn’t been hit as hard by the drop in oil prices, to also pick up steam.

In addition, the insanity in Europe over Greece is fading and the rest of the continent seems to be coming around. Thus, we may finally start seeing some decent industrial production increases over the next few months.

The FOMC meeting is tomorrow and Wednesday and we will know soon enough if the members are ready to start raising rates. I expect the statement to be a little more optimistic about the economy and though it will contain the usual temporizing phrases, it should lean toward a rate hike happening soon.

Do investors get that?

With earnings being released, those that like to look backward will be having their day.

But investors should start thinking about the fourth quarter and beyond, when rates are likely to be on the rise, when they consider where the markets and companies will be going.