PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Durable Goods Plummet

By at 27 February, 2024, 1:01 pm

by Raymond J. Keating –

There’s not much too latch onto that’s positive in the latest durable goods report from the U.S. Census Bureau. Indeed, this is not a pretty picture of new orders for manufactured durable goods in January.

The topline number showed that durable goods orders plummeted by 6.1 percent in January, and have declined in three of the last four months, and in five of last seven months.

Indeed, the only major category where we saw something positive in January was in “computers and related products,” where new orders grew by 5.8 percent. Meanwhile “transportation equipment” was hit by a decline of 16.0 percent in January.

New orders for capital goods – that is, investment, or products used to produce other products – declined by 15.0 percent, after a decline of 1.4 percent in December. And nondefense capital goods new orders fell by 19.4 percent, after an increase of a meager 0.1 percent in December.

One key measure in the monthly durable goods report is new orders for nondefense capital goods excluding aircraft, which draws attention as an indicator for private investment in equipment and software in forthcoming GDP data. New orders here inched ahead by 0.1 percent, after a decline of 0.9 percent in December.

Source: Federal Reserve Bank of St. Louis, FRED

As noted in the above chart, after a dramatic and welcome recovery after the pandemic hit, new orders for nondefense capital goods excluding aircraft have effectively stagnated since August 2022.

Private-sector investment, of course, is vital for innovation, productivity, income growth, and economic growth now and in the future. Policymakers might want to keep this in mind, and in turn, incentivize investment via tax and regulatory relief – as opposed to looking for ways to raise costs via increases in taxes, regulations and tariffs.

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, The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist and The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.

 

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