In July, the monetary base was $4.700 trillion, which was lower for the second month in a row. Compared with one year ago, July’s monetary base was up 44.2%.  This was the fourth consecutive month that the month-over-month rate of change was faster than 44%. However, the rate of growth decelerated for the second straight month. (In 2009, the monetary base increased more than 100% five times in the first eight months of the year.) This was the eighth month in a row of month-over-month growth. The annual rate of growth accelerated to 15.4% in July, which was the third straight month of accelerating growth.

Historically, the annual rate of change in the monetary base leads capital equipment consumption, specifically machine tool orders, by 12-18 months. Although, the lead time between the monetary base and capital equipment consumption shrunk over the last decade. 

The recent rapidly accelerating growth in the monetary base should eventually lead to accelerating growth in machine tool orders and capital equipment in general. Based on the historical relationship, machine tool orders should bottom sometime between September 2020 and February 2021.