September 2017 Durable Goods Orders
Submitted by Atlas Indicators Investment Advisors on November 1st, 2017Orders for durable goods jumped in September according to the Census Bureau. Orders for wares expected to last longer than three years increased 2.2 percent or $5.1 billion to $238.7 billion. This increase, which is the third in four months, followed August’s uptick of 2.0 percent. Like the prior period, commercial aircraft orders led the monthly gain.
Since aircraft orders are big and can happen in fits and starts, Atlas prefers to pay closer attention to nondefense capital goods orders excluding aircraft. This “core” measure of the indicator is a proxy for business confidence and was strong as well. Rising 1.3 percent, matching July’s growth-rate as well as the upwardly revised improvement from a month earlier (originally 0.9 percent), this segment of the report suggests businesses are feeling better about parting with their cash, and this could lead to beneficial knock-on effects.
Capital investment has been relatively light for years. However, the recent improvements in the orders should help our economy improve productivity, a necessary component to encourage healthy output while keeping a lid on inflation. Additionally, the orders themselves will get counted toward gross domestic product (GDP) when these demands are filled.
September data for this indicator looks encouraging. It suggests the current expansion will continue; backed by firms exhibiting more confidence through increased capital spending, our economic growth is becoming more firmly footed. It should also help the economy’s growth become more diversified, augmenting the contribution from consumers on a relative basis.