Durable Goods December Report: Business Investment Falters at End of 2019

By at 29 January, 2020, 2:34 pm

by Raymond J. Keating-

The U.S. Census Bureau’s durable goods report for December showed that topline durable goods new orders grew by 2.4 percent in December, after a decline of 3.1 percent in November and barely inching ahead by 0.2 percent in October. Meanwhile, shipments declined in each of the last three months of 2019.

However, looking at capital investment measures, the story gets uglier. Nondefense capital goods new orders dropped by 6.5 percent in December, which followed on a decline of 4.8 percent in November.

Further zeroing in on nondefense capital goods excluding aircraft orders, which offers a gauge of private investment in equipment and software, new orders declined by 0.9 percent in December, which followed on a mere 0.1 percent gain in November.

Source: Federal Reserve Bank of St. Louis, FRED

For good measure, nondefense capital goods excluding aircraft orders has been on a general decline (as noted in the above chart) since July 2018.

These numbers do not bode well for any kind of bounce back in business investment in the GDP data for the fourth quarter of 2019, nor for business investment for all of 2019. We will get that data later this week. For now, it should be noted that real business (nonresidential) investment declined in both the second and third quarters of 2019.

On the policy front, the key obstacle to strong business investment has been trade policies that have increased tariffs, and driven uncertainty and costs higher.

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


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