Durable Goods Orders Down in February

By at 24 March, 2021, 12:52 pm

by Raymond J. Keating-

The U.S. Census Bureau reported that durable goods orders fell by 1.1 percent in February. That broke a streak of nine months of increases, after, of course, major declines in March and April of last year with the onset of the COVID-19 pandemic and related shutdowns.

If we look at capital goods – i.e., business investment in productive capacity – the story is mixed. New orders for capital goods overall increased by 2.9 percent in February, following on a very strong 8.5 percent gain in January. That’s good news.

But looking at nondefense capital goods excluding aircraft new orders, which serves as a measure for what private investment in equipment and software will look like in the GDP data, it declined by 0.8 percent in February. In addition, growth in previous months had been slowing (see following chart).

Source: Federal Reserve Bank of St. Louis FRED

And then, as noted in other SBE Council briefs on February economic data, major parts of the country were in a deep freeze for a good chunk of February. That, of course, raises questions about whether February numbers are part of a trend, signal a change, or are just one-month, weather-related exceptions. As a result, it’s hard to come away from February economic data with a feeling of confidence. Instead, we are left waiting for March and April numbers to clarify matters.

Regarding durable goods, the big question is: Is the February decline in nondefense capital goods excluding aircraft new orders  – as well as the drop in durable goods orders overall – point to a growing concern or just a passing cold snap?

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


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