September 29, 2016 Reading Time: < 1 minute

Durable goods orders were flat in August, but core capital goods posted their third straight gain, according to data released by the Commerce Department on Wednesday.

Orders for durable goods – items meant to last three years or more – were unchanged in August following a 3.6 percent jump in July. In general, durable-goods orders have been trending flat for the past three and a half years (Chart 1).  Weakness has been concentrated in energy and commodity-related equipment.

The good news in the details was the third monthly gain for core capital goods, which are nondefense capital goods excluding aircraft.  These data are a proxy for overall business investment. Core capital goods rose 0.6 percent in August following a 0.8 percent rise in July and a 0.5 percent increase in June.

Together, these three months of gains may be reversing a mild down trend that began in mid-2014 (Chart 1 again). More data are necessary to be sure that business investment is on a recovering path, but the latest data are an encouraging sign.

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.

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