Real Capital Goods Orders Fall 1.5% in February
According to the Census Bureau, real capital orders for February were $87,802. This is a decrease of 1.5% compared to February 2012. The annual rate of change, now -4.7%, has contracted faster each of the last four months. However, February orders were the second highest since March 2012, with only December 2012 higher.
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. Since late 2009, real consumer spending has been growing steadily. Lately, consumer spending has been hitting a new all-time high in most months. But, for the last year, the rate of growth in consumer spending has been relatively flat. Historically, this has been a negative signal for future trends in real capital goods orders. However, in the last couple of months, real consumer spending has been growing faster. This could be indicating that a bottom in the rate of change of real capital goods orders in the next few months.
We use real capital goods orders to forecast activity in metalcutting job shops, durable goods, and metalworking. To see charts comparing real consumer spending and real capital goods orders, click on any of the preceding links.
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