February 2018 Durable Goods Orders

Durable goods orders nearly offset their prior period’s loss during February 2018 according to the Census Bureau.  Rising 3.1 percent to $247.8 billion, this uptick followed the upwardly revised loss of 3.5 percent (originally minus 3.7 percent) in January.  Despite the increase falling short of making up for the loss at the beginning of this year, the year-over-year trend accelerated to 8.9 percent from the upwardly revised count of 7.1 percent (originally 6.8 percent) a month earlier.

While the headline captures the initial attention, Atlas was most impressed by the some of the details in the report.  More specifically, data on core items were encouraging.  These non-defense capital goods orders excluding aircraft jumped 1.8 percent in February.  Upticks in these orders are thought to coincide with improving business confidence because these items are likely expensive and often require financing to purchase.  Companies want to believe they will be able to afford the outlays during the next several quarters or even years before committing large sums of money. 

In addition to orders, shipments of core capital goods improved 1.4 percent; this substantial monthly uptick should help boost the nation’s first quarter 2018 gross domestic product tally when it is released toward the end of this month.

Durable goods orders measure actual behavior, so they are worth paying close attention to each month.  Historically, they have followed the contours of the business cycle, making them one of Atlas’ favorites.  After several weeks of writing about deceleration, some key indicators are beginning to show signs of renewed life.  Perhaps spring has sprung for America’s economy.