Positive News on Durable Goods in February

By at 26 March, 2024, 3:17 pm

by Raymond J. Keating – 

Each month, the durable goods report from the U.S. Census Bureau provides information on new orders to manufacturers, including orders for capital goods, i.e., products used to produce other products, or capital investment.

New orders for manufactured durable goods grew by 1.4 percent in February. That came after two monthly declines, including a drop of 6.9 percent in January. As noted in the following chart from the report, the data have been volatile month-to-month since July of last year.

As for capital investment, new orders for capital goods have been heavily affected by changes in nondefense aircraft and parts at the start of 2024 – with new orders plunging by 63.5 percent in January and then increasing by 24.6 percent in February. Understanding this, new orders for capital goods declined by 17.1 percent in January, and then grew by 1.9 percent in February. And new orders for nondefense capital goods fell by 21.2 percent in January, and then grew by 4.4 percent in February.

New orders for nondefense capital goods excluding aircraft garners close attention as it is an indicator for private investment in equipment and software in forthcoming GDP data. These new orders grew by 0.7 percent in February, after declines in January (-0.4 percent) and December (-0.6 percent).

So, the takeaway from this report is a hope that manufacturing and business investment have shaken off two rough months, and moved onto a growth track. Unfortunately, there are an assortment of costs and uncertainties on the policy front that serve as obstacles, including efforts focused on increasing tax and regulatory burdens, limiting international trade, expanding the size of government, and anchorless monetary policy.

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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