Durables Data: Capital Investment Growth Solid in August

By at 27 September, 2021, 2:50 pm


by Raymond J. Keating –

According to the latest durable goods report from the U.S. Census Bureau, investment looked strong in August 2021.

The topline in this latest report showed that new orders for manufactured durable goods in August grew by 1.8 percent (seasonally adjusted), compared to growth of 0.5 percent in July.

But there was more good news. The monthly durable goods report also provides some specific insights on business investment, which of course is vital to current and future economic growth.

Regarding capital goods, that is, investments made in goods that produce other goods, new orders grew by a robust 6.7 percent in August, after a notable decline in July. Also, again after a significant decline in July, new orders for nondefense capital goods leaped by 9.0 percent. As noted in the following chart, new orders in nondefense capital orders in August recovered to the point where they surpassed the most recent high set in January 2019.

Source: Federal Reserve Bank of St. Louis, FRED

If we then focus on nondefense capital goods excluding aircraft new orders, which is an indicator for private investment in equipment and software in forthcoming GDP data, they grew by 0.5 percent in August, which was up from 0.3 percent in July and 0.1 percent in June.

Source: Federal Reserve Bank of St. Louis, FRED

The recovery in this measure of investment has been robust since April 2020, as noted in the above chart.

It also should be noted that these positives on the investment front are placed at risk due to a policy agenda being pushed in Washington that emphasizes increased taxes, more regulation, higher levels of government spending, and a murky, at best, trade agenda. Those are policy items that explicitly work against the entrepreneurship and private-sector investment needed for recovery and strong expansion in the economy.

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


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