Capital Goods Orders Decline for Third Time in 2014

According to the Census Bureau, real capital goods new orders in May 2014 were $87,494 million. The month-over-month rate was -3.8%, which is the first month of contraction since February, which ended a string of three months of contraction. The annual rate of change has grown for 10 straight months. During that time, the annual rate of change has generally accelerated its rate of growth, growting at rate of 4.9% in May. This is a slower rate of growth than the previous two months, but the general trend still shows accelerating growth in real capital goods new orders.

A good leading indicator for real capital goods new orders is real consumer spending. Since September 2013, the annual rate of change in real consumer spending has seen slightly accelerating growth. This is a positive sign that we will see further accelerating growth in real capital goods new orders.

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