Bounce Back on Durable Goods and the Investment

By at 24 March, 2018, 10:17 am

by Raymond J. Keating-

The topline number on the U.S. Census Bureau’s February durable goods saw a nice bounce back. While new orders declined by 3.5 percent in January, February’s growth came in at 3.1 percent.

Durable goods orders matter because they serve as a leading indicator on the economy, gauging the confidence of both businesses and households to make investments. In addition, durable goods orders offer a look at where things are headed on manufacturing.

Particularly interesting, the capital goods orders were up by a robust 5.8 percent, compared to the 4.7 percent decline in January. That’s a very welcome return to growth given that capital goods order are a proxy for general business investment.

Drilling down a bit more, nondefense capital goods excluding aircraft orders offer a take on private investment in equipment and software, which accounts for a significant share of GDP private investment. This measure was by 1.8 percent in February, after declines in both January (-0.4 percent) and December (-0.5 percent).

By the way, looking over a longer stretch, nearly every measure in the durable goods report showed strong growth compared to a year earlier. That must be mentioned, given the inevitable volatility in month-to-month data.

There has been some concern of a slight slowdown in investment – for example, as noted in the Fed’s statement on March 21 (see SBE Council’s analysis) – so a bounce back in durable goods orders in February point to stepped up investment as well as growth in manufacturing.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.


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