PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

ECONOMIC NEWS: Durable Goods Growth Continued in June

By at 27 July, 2021, 4:52 pm

by RAYMOND J. KEATING –

After suffering a decline in April, durable goods new orders grew for the second consecutive month in June, according to the latest report from the U.S. Census Bureau. Since the major declines suffered in March and April of 2020, durable goods orders have now increased in 13 of the last 14 months. That’s been a positive in this recovery.

Seasonally-adjusted durable goods orders were up by a robust 3.2 percent in May and a solid 0.8 percent in June.

Also, the June 2021 level was 11.6 percent above the February 2020 pre-pandemic level. However, it must be pointed out as well that the June 2021 level effectively stands at the same level as the recent high achieved in May 2019. That’s a two-plus-year stall. If inflation were factored in, durable goods orders would be down.

Source: Federal Reserve Bank of St. Louis, FRED

As for capital goods, that is, investments made in goods that produce other goods, new orders grew by a strong 2.6 percent in June, after a leap of 6.9 percent in May.

We then zero in on nondefense capital goods excluding aircraft new orders because it is a measure of what private investment in equipment and software might look like in the GDP data.

Growth remained solid in June (+0.5 percent), and has been robust after April 2020. In fact, this portion of durable goods investment broke into new highs starting in November 2020 has continued on a growth path (at least, again, when inflation is not considered).

Source: Federal Reserve Bank of St. Louis, FRED

Private investment is essential to current and future economic growth. These latest indicators from the durable goods report are most welcome.

At the same time, however, getting back to where we previously were, along with a bit of growth, given the pandemic, is not a particularly noteworthy achievement. This is what we should minimally expect.

Looking ahead, making up lost growth and moving into robust expansion territory will require expanding confidence among entrepreneurs and investors, and policymaking that encourages, or incentivizes, growth-generating entrepreneurship and private investment.

The current emphasis from the Biden administration and Congress on raising costs via higher taxes and expanding regulation explicitly works against such requirements.

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

 

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