In August 2021, the monetary base was $6.329 trillion, which was its highest level ever. Compared with one year ago, August’s monetary base was up 31.6%, which was the third straight month of accelerating month-over-month growth. Also, this was the 21^st consecutive month of growth. It was the 16^th in the last 17 months with growth faster than 20%. 

The annual rate of growth decelerated to 38.6% in August, which was the fifth consecutive month of decelerating growth. Based on the monthly and quarterly trends in the money supply, it is likely that the annual rate of growth in the money supply will continue to decelerate.

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 rapidly accelerating growth in machine tool orders and capital equipment in general. However, based on the historic correlation, it should be expected that growth in capital equipment orders will peak in the second quarter of 2022.