PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Durable Goods: New Orders Down in July

By at 25 August, 2021, 7:00 pm

by Raymond J. Keating –

The latest durable goods orders report from the U.S. Census Bureau served up some negative numbers for July. Hopefully, this is a one-month incident, and not a trend.

First, the topline number showed durable goods new orders down by 0.1 percent in July. But that came after a 0.8 increase in June. In fact, since the big declines in March and April of 2020, durable goods new orders have declined in only two months – in April 2021 and July 2021.

Also, as noted in the following chart, volatility tends to be the rule with monthly changes in durable goods new orders.

Source: Federal Reserve Bank of St. Louis, FRED

Second, and more troubling, are the latest numbers on capital goods (i.e., goods used to produce other goods). New orders for capital goods declined by 5.0 percent in July, and new orders for nondefense capital goods fell by 8.0 percent.

Also, if we zero in on nondefense capital goods excluding aircraft new orders – an indicator of private investment in equipment and software – they were flat (actually +0.05 percent) for July. As noted in the following chart, this measure of private investment has grown solidly since April of last year.

Source: Federal Reserve Bank of St. Louis, FRED

The private investment numbers in this latest durable goods report are troubling.

Again, let’s hope that these July declines are part of usual ups-and-downs in this dataset, and not something more lasting. It would be productive, of course, if the Biden administration and Congress would back off from a policy agenda focused on increasing tax and regulatory burdens on entrepreneurs, businesses and investors.

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

 

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