– February 27, 2020

New orders for durable goods decreased 0.2 percent in January following a 2.9 percent gain in December. If aircraft are excluded, new orders for durable goods decreased 2.5 percent in January following a 3.1 percent gain in December. Durable-goods orders excluding aircraft have been trending flat, around the $235 billion level since mid-2018 and are 0.9 percent below the January 2019 level (see chart).

New orders for nondefense capital goods excluding aircraft, a proxy for business investment, rose 1.1 percent in January following a drop of 0.5 percent in December. This key category has also been trending flat since mid-2018, hovering at just under $70 billion (see chart).

The results for the categories of durable goods shown in the report were tilted to the positive side in the latest month. Among the industries showing increases were nondefense aircraft, jumping 346.2 percent, primary metals, gaining 2.2 percent, fabricated metal products, rising 1.2 percent, machinery, increasing 2.1 percent, and computers and electronic products, posting a 0.3 percent gain. The catch-all “other durables” category was unchanged in January.

Categories showing declines for January were motor vehicles, down 0.7 percent for the month, electrical equipment and appliances, off 1.4 percent in January, and defense aircraft, lower by 19.6 percent.

Other data out today include the latest weekly initial claims for unemployment. For the week ending February 22, claims totaled 219,000, up 8,000 from the prior week. The four-week average came in at 209,750 versus 209,250 in the prior week. The continued historically low levels of initial claims suggest the labor market remains very tight.

Today’s data are mildly positive overall. The report on durable-goods orders suggests that demand remains relatively solid, though there is little growth, while the low level of claims suggest the labor market remains robust. The most likely path remains continued economic expansion, but a heightened degree of caution is warranted.

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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