December 2018 Durable Goods Orders

Here is another indicator delayed by the lapse in federal funding a couple of months ago.  However, the Census Bureau is confident the information collected was adequate to produce the report.  They went so far as to disclose at the top of the report that “…coverage rates were at or above normal levels for this release.”  So here we go!

Orders for wares expected to last longer than three years increased 1.2 percent to end the year.  This improvement follows the strong 1.0 percent gain in November, but these two strong periods were not enough to make up for the 4.3 percent collapse in October.  Nevertheless, this indicator rose an impressive 8.1 percent for all of 2018.

Looking further into the report reveals a fly in the ointment.  Companies were reluctant to invest in capital equipment.  Nondefense capital goods orders excluding aircraft (core durable goods) declined 0.7 percent after dropping 1.0 percent in November.  Something is keeping firms from parting with the cash needed to buy productivity-enhancing machines.  Those at the helm of these companies may have concerns about the return on their investment being too low to justify such an expenditure to their respective boards of directors.

Core durable goods orders will be monitored closely in the next release because its recent weakness is running parallel to a few other key indicators which are also waning.  As you saw in yesterday’s note, manufacturing data within the Federal Reserve’s industrial production report decelerated as well.  Evidence of economic slowing is becoming more pervasive.  Thus far, the friction has not reached levels associated with a recession, but the Federal Reserve has acknowledged the heat in their public addresses.  With any luck they will maneuver policies in ways that keep the economy moving forward without unintended consequences which are overly harsh.