Durable Goods: New Orders Turned Down in July

By SBE Council at 24 August, 2023, 3:30 pm

by Raymond J. Keating –

The U.S. Census Bureau has reported that new orders for manufactured durable goods took a turn down in July after four months of growth.

The July decline came in at 5.2 percent (seasonally adjusted), which followed on a 4.4 percent gain in June. A big reasons for the July decline came on the transportation front, with a decline of 14.3 percent.

But new orders for capital goods warrant attention. After all, capital goods are investment, i.e.,  goods that produce other goods. After a big gain in new orders for capital goods of 10.9 percent in June, July saw a decline of 13.7 percent. And new orders for nondefense capital goods fell by 15.6 percent in July, after a jump of 16.8 percent in June.

A key investment measure is nondefense capital goods excluding aircraft orders, which serves as an estimate of private investment in equipment and software in forthcoming GDP data. Nondefense capital goods excluding aircraft orders inched up by 0.1 percent in July, after a decline of 0.4 percent in June.

As noted in the above chart, new orders for nondefense capital goods excluding aircraft bounced back nicely from its pandemic depths until August of last year. Since then, these new orders have been flat in nominal terms. Factor inflation in, and they’ve declined. Pulling in real GDP data, the broad equipment investment category declined in two of the last three quarters, and in three of the last five.

Of course, private business investment is vital to current and future economic growth. Indeed, sluggish investment inevitably means continued sluggish economic growth.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist and The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist.