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April’s Durable Goods Data

By at 25 May, 2024, 1:43 pm

by Raymond J. Keating – 

According to the latest “Durable Goods Manufacturers’ Shipments Inventories and Orders” report from the U.S. Census Bureau, new orders for manufactured durable goods in April increased by 0.7 percent, which followed on increases of 0.8 percent in March and 1.2 percent in February.

However, zeroing in on capital investment, new orders for capital goods actually declined by 1.5 percent in April, after growth of 1.3 percent in March and 3.5 percent in February.

New orders for nondefense capital goods excluding aircraft warrants close attention as it is an indicator for private investment in equipment and software in forthcoming GDP data. These new orders grew by 0.3 percent in April, after a decline of 0.1 percent in March and a gain of 0.5 percent in February.

It also must be kept in mind that durable goods data is in nominal dollars, not inflation-adjusted dollars. Therefore, these gains must be reduced in real terms given that inflation (as measured by CPI) ran at 0.3 percent in April. In fact, as noted in the following chart, new orders for nondefense capital goods excluding aircraft has been flat since August 2022 in nominal terms – again, declining once inflation is considered.

Source: Federal Reserve Bank of St. Louis, FRED

In the end, this is a mixed report, given that topline growth was most welcome, but at the same time, some key investment numbers, especially once inflation is considered, are troubling.

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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