Economic News Blog
Posted by: Steven Kline, Jr. 4. February 2014

Capital Goods Orders Drop 2.3% In December 2013

According to the Census Bureau, real capital goods new orders in December 2013 were $113,073 million. This is a decrease of 2.3% compared to December 2012. While capital goods new orders fell in December, the month-over-month rate of change has grown six of the last nine months. And, December 2013 was the seventh highest total of capital goods new orders ever. It was the second highest amount of new orders since December 2006. So, in spite of the drop from last December, real capital goods new orders still seem to be pretty strong. The annual rate of change has grown each of the last five months.

A good leading indicator for real capital goods new orders is real consumer spending. As consumers spend more on all goods, businesses need more capital equipment to make the goods consumers are buying. Since October 2011, the rate of growth in real consumer spending has been slowly decelerating. There are many historical instances where the current pattern in real consumer spending has led to accelerating growth in real capital goods new orders. However, real consumer spending looks like it might start decelerating faster. If that happens, then the annual rate of growth in capital goods orders may remain relatively weak.

We use real capital goods new orders to forecast activity in metalcutting job shopsdurable goods, and metalworking.

 

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