The Latest Durable Goods Report: A Mixed Bag

By at 27 October, 2021, 1:44 pm

by Raymond J. Keating –

The U.S. Census Bureau’s durable goods report served up a mixed bag on manufacturers’ new orders.

The topline certainly was not good news, with new orders in September 2021 declining by 0.4 percent (seasonally adjusted data) versus the previous month. However, this came after four straight months of increases, and was only the second down month over the past year.

Source: Federal Reserve Bank of St. Louis, FRED

To get a gauge on investment, let’s turn to capital goods, i.e., investment in goods that produce other goods. New orders for capital goods were down in September by 0.4 percent, and nondefense capital goods order dropped by 4.2 percent.

Source: Federal Reserve Bank of St. Louis, FRED

Finally, nondefense capital goods excluding aircraft new orders is an indicator for what private investment in equipment and software might look like in forthcoming GDP data. Of course, this is only one month’s data in the third quarter. This grew by 0.8 percent in September. And as noted in the following chart, nondefense capital goods excluding aircraft new orders have shown great strength in recovery and expansion after the initial pandemic hit.

Source: Federal Reserve Bank of St. Louis, FRED

Clearly, the September decline in durable goods orders is not an economic positive, but at least durable goods orders, including nondefense capital goods, are basically above pre-pandemic levels, with a key measure of private investment continuing to show real strength. Make no mistake, private investment is essential for current and future economic growth.

Unfortunately, an assortment of policy measures under consideration, including higher capital gains and corporate income taxes, and increased regulatory burdens, create questions and uncertainties that will work to dampen critical investment.

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


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