Economic News Blog
Posted by: Steven Kline, Jr. 3. May 2013

Real Capital Goods Continue to Decline - Fall 6.5% in March

According to the Census Bureau, real capital orders in March 2013 were $84,935. This is a decrease of 6.5% compared to March 2012. The annual rate of change, now -4.9%, has contracted faster each of the last five months. However, the annual rate of contraction was virtually unchanged compared to the previous month. Real capital goods orders could be nearing a bottom.

A good leading indicator for real capital goods orders is real consumer spending. As consumers spend more on all goods, business need more capital equipment to make the goods consumers are buying. The last four months have shown accelerating growth in the month-over-month rate of change for real consumer spending. The annual rate of change looks to have bottomed and may start showing accelerating growth in the next couple of months. This would be a positive sign for real capital goods new orders. It could indicate that by the summer of 2013 the rate of contraction in real capital goods orders will begin to slow down.

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

 

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