Home Economic Trends Core Capital-Goods Orders Hit A Record High in December – Robert Hughes...

Core Capital-Goods Orders Hit A Record High in December – Robert Hughes (01/28/2021)

New orders for durable goods posted an eighth consecutive gain in December, rising 0.2 percent following a gain of 1.2 percent in November. Total durable-goods orders are up 3.8 percent from a year ago.

Durable-goods orders excluding aircraft and parts rose 0.7 percent for the month following 1.1 percent gains in the prior two months. That is the fourth increase in a row and the seventh gain in the last eight months and puts the level of orders at $241.3 billion, a new record high (see first chart).

New orders for nondefense capital goods excluding aircraft, a proxy for business equipment investment, rose 0.6 percent in December after gaining 1.0 percent in November, putting the level at $71.8 billion, a new record high. This important category had been in the $65 to $70 billion range for several periods over the past 15 years before dropping to $61.3 billion in April 2020. The $61.3 billion pace was the slowest since June 2017 (see first chart).

All but two of the major categories of durable goods shown in the report had a gain in the latest month. Among the individual categories, primary metals rose 0.3 percent, fabricated metal products gained 0.6 percent, machinery orders were up 2.4 percent, electrical equipment and appliances gained 0.1 percent, and the catch-all “other durables” category was up 0.5 percent. The two decliners were transportation equipment orders, down 1.0 percent and computers and electronic products, down 0.2 percent. Within transportation, motor vehicle and parts orders rose 1.4 percent, but the gain was offset by a 51.8 percent plunge in nondefense aircraft orders and a 5.0 percent fall in defense aircraft orders. Within the computers and electronic products category, computer-product orders fell 3.4 percent while communications equipment orders rose 0.3 percent (see second chart).

The report on durable-goods orders shows the resilience of the business sector in light of the Covid-19 pandemic and government lockdown policies. Extraordinary damage has been caused across the economy, but as government restrictions are eased, signs of recovery have emerged. However, the recovery remains very uneven across the economy and the recent surge in new Covid-19 cases has resulted in some renewed government restrictions, threatening the recovery. The rollout of the vaccine and acknowledgment that widespread lockdowns are not the most effective policy provides hope that complete economic recovery will come eventually.