Durable Goods: Mixed Report for March

By at 27 April, 2022, 8:37 am

by Raymond J. Keating –

After a decline in February, manufacturers’ durable goods orders returned to growth in March, according to the latest report from the U.S. Census Bureau. However, after drilling down, this latest report is rather mixed.

Specifically, after declining by 1.7 percent in February, new orders for durable goods grew by 0.8 percent (seasonally adjusted) in March. As noted in the following chart, new orders for durable goods have been on a general rise since the pandemic hit.

Source: Federal Reserve Bank of St. Louis, FRED

That’s the good news.

But it is dampened some by noting that even with growth returning, the March level remained below where orders were in January.

Capital goods new orders always warrant attention, since these are orders for goods that produce other goods. That is, this is about investment. The story here is mixed.

First, new orders for capital goods actually declined by 1.1 percent in March, after a big decline of 4.3 percent in February.

The same basic story played out for nondefense capital goods orders, with a decline of 0.5 percent following on a major drop of 6.1 percent in February.

However, nondefense capital goods excluding aircraft new orders – an estimate of what private investment in equipment and software might look like in forthcoming GDP data – experienced growth in March, rising by 1.0 percent after a decline of 0.3 percent in February.

Source: Federal Reserve Bank of St. Louis, FRED

As noted in the above chart, new orders for nondefense capital goods excluding aircraft have seen strong growth since the pandemic struck in March and April of 2020.

So, we have shifted from February’s declines in the durable goods report to March offering a mixed story.

For the sake of the economy now and into the future, we need to see investment get back on a robust growth path. That move, however, will be made more difficult given an assortment of risks and uncertainties swirling, including inflation and federal policymakers bent on jacking up tax and regulatory burdens.

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


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