Economic activity in the manufacturing sector expanded in November, and the overall economy grew for the 102nd consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The PMI increased to the highest level since March 2011. Furthermore, increases in production (best in 34 years), New Orders, Backlogs and Unfilled Orders.

Of the 18 manufacturing industries, 14 reported growth in November.

Sounds pretty hot, right?

On December 10th, before the tax bill passed, the Financial Review published an article titled, “The US economy may be getting too hot.”

Interesting idea, as the tax bill came thereafter. Many economists believe that the fiscal stimulus is “very poorly timed.”

In a conversation we had with Ellen Zentner, chief economist for Morgan Stanley, she said that tax cuts are most effective when the economy is floundering and not necessarily effective at this late stage.

My takeaway from that conversation is that not only might the impact prove potentially impotent, it could lead to inflation that outpaces economic growth.

With a new Federal Reserve chairman, one that Ms. Zentner says is competent and a team player, what could possibly go wrong?

The theory behind the tax cuts are that with corporate rates falling from 35 to 21%, corporations will use the extra money for new investments.

However, companies now spend about $71 billion a month, a level virtually unchanged since late last year.

Passage of the tax cuts have pushed Wall Street to boost its forecasts faster than corporations have increased their actual spending.

The gap between the projections and actual outlays is now the widest since August. (Blomberg 12/28/17)

On the other hand, about 36 percent of corporate executives say they plan to increase capital investment in 2018, which is four times more than in 2016.

It’s too soon to know what corporations will do-use the boon to buy back their own stocks or invest in growth.