Capital Goods Orders Continue to Contract
Real capital goods new orders in April 2015 were $81,308 million. Orders in April 2015 were 12.2 percent lower than they were one year ago. This was the sixth month in a row that the month-over-month rate of change contracted. And, the 12.2 percent contraction was the fastest rate of contraction since July 2013. This is a very volatile data series. But, the annual rate of change clearly has decelerated since July 2014. The annual rate of growth is now 2.2 percent, which is the slowest rate of growth since June 2014. The annual rate of change will likely begin to contract when July 2014's record orders move into the comparison year. Therefore, capital goods orders are pointing toward slower capital spending at the moment. Total capital goods new orders tend to lead industrial production by three months and capital spending by 18 months on average based on long-term historical correlations.
A good leading indicator for real capital goods new orders is real consumer spending. In the last couple of months, the month-ove-month rate of change in real consumer durable goods spending has been growing but the rate of growth was decelerating. The annual rate of change in total consumer spending and durable goods spending has started to decelerate. This indicates that real capital goods new orders likely will see further decelerating growth or accelerating contraction in 2015.
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