Durable Goods: New Orders Returned to Growth in August

By SBE Council at 27 September, 2023, 8:39 pm

by Raymond J. Keating –

According to the latest report from the U.S. Census Bureau, new orders for manufactured durable goods returned to positive growth territory in August, after a massive decline in July. Previously, durable goods orders were up in each month from March to June.

The July change was revised down to -5.6 percent (seasonally adjusted), with August registering +0.2 percent.

As always, new orders for capital goods warrant attention, given that capital goods are investment, i.e.,  goods that produce other goods. After a June leap of 10.9 percent in new orders for capital goods, July registered a decline of 14.6 percent (revised down) and then we had a decline of 0.2 percent in August. And new orders for nondefense capital goods also fell for the second consecutive month, i.e., -16.7 percent in July and -2.9 percent in August

Nondefense capital goods excluding aircraft orders is an indicator that earns attention because it serves as an estimate of private investment in equipment and software in forthcoming GDP data. And this category of investment actually experienced a nice gain (+0.9 percent) in August, after declines in both June and July (each at -0.4 percent).

Source: Federal Reserve Bank of St. Louis, FRED

As noted in the above chart, though, new orders for nondefense capital goods excluding aircraft have been stagnant for the past year. As always, it’s vital to keep in mind that private investment today is a key driver of economic growth now and in the future.

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.