Economic News Blog
Posted by: Steven Kline, Jr. 12. March 2013

Capital Goods Orders Fall 11.3% in January

According to the Census Bureau, real capital goods orders for January were $71,139 million. This was a decrease of 11.3% compared to January 2012. In seven of the last 11 months, real capital goods orders have contracted month over month. January was the second largest month-over-month contraction of those seven months. Annually, the rate of contraction in capital goods new orders is -3.1%. This is the third straight month of contraction. 

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. The charts below show that the rate of growth in consumer spending had been decelerating for most of 2011 and 2012. In turn, the growth in real capital goods orders was decelerating and is not contracting faster each month. However, real consumer spending appears to have bottomed, which should lead to at least a slower contraction in real capital goods orders later in 2013.

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




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