April Durable Goods Report: A Mixed Story for Manufacturing

By at 27 May, 2021, 12:50 pm


The latest durable goods report from the U.S. Census Bureau served up a mixed story for manufacturing in April.

The troubling aspect of this report is that durable goods new orders declined by 1.3 percent in April 2021. That was the first decline since April 2020, when we were in the midst of the initial hit from the pandemic. That, of course, warrants watching.

However, after excluding transportation, new orders did increase by 1.0 percent. As noted in the report, “Transportation equipment, down two consecutive months, drove the decrease…”

As for capital goods – i.e., business investment in productive capacity – new orders in April fell by 0.5 percent. However, nondefense capital goods increased by 3.5 percent.

And if we zero in on nondefense capital goods excluding aircraft new orders, which is a gauge for what private investment in equipment and software might look like in the GDP data, that indicator increased by 2.3 percent in April.

Source: Federal Reserve Bank of St. Louis, FRED

In fact, as noted in the above chart, nondefense capital goods excluding aircraft new orders has recovered and expanded nicely since the initial pandemic hit. That’s a positive for growth now and in the future.

Continuing and accelerating investment will depend not only on more and more Americans becoming vaccinated and the economy fully opening up, but also on policymaking, for example, implementing policies at the federal, state and local levels that incentivize entrepreneurship and private investment, such as via tax and regulatory relief. Make no mistake, increasing tax and regulatory burdens will only hamper U.S. economic, income and employment growth.

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


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