Capital Goods Orders Contract for Third Month

Real capital goods new orders in January 2015 were $72,671 million. Orders in January 2015 were 2.7% lower than they were one year ago. This is the second third month in a row that the month-over-month rate of change contracted. The last time there was three months in a row of contraction was January through March 2013. While this is a very volatile data series, the annual rate of change has seen decelerating growth for three straight months. The trend of decelerating growth does appear that it will continue for at least the next couple of months. 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 spending, particularly real consumer durable goods spending, has seen accelerating growth. This indicates that real capital goods new orders will return to accelerating growth at some point in 2015.

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