Durable Goods Report Offers Negative Take on Investment

By SBE Council at 25 October, 2024, 8:25 pm

by Raymond J. Keating -

According to the latest report from the U.S. Census Bureau, new orders for manufactured durable goods declined in September. The decline of 0.8 percent in September registered the same as the 0.8 percent decline in August. New orders have been down in three of the last four months.

Year-to-date new durable goods orders are down 1.5 percent versus the same period last year.

If we look at new orders for capital goods (i.e., investment goods, or goods that make other goods), September experienced a decline of 2.8 percent, following a revised downward decline for August of 2.6 percent. And comparing the first nine months of 2024 versus the same period in 2023, new orders for capital goods declined by 5.9 percent.

New orders for nondefense capital goods excluding aircraft always warrants attention as it is an indicator for private investment in equipment and software in forthcoming GDP data. Here is a bit of good news in this report. These new orders grew by 0.5 percent in September after a revised upward gain of 0.3 percent in August.

Once more, comparing the year-to-date in 2024 versus the same period in 2023, new orders for nondefense capital goods excluding aircraft grew by 0.3 percent. As we noted regarding last month's data, this small growth basically is wiped out by inflation, as durable goods orders are in nominal dollars.

For further perspective, keep in mind that when looking at manufacturing data, we're overwhelmingly talking about small businesses. Consider that 60.3 percent of employer firms in manufacturing have fewer than 10 employees, 75.2 percent fewer than 20 employees, and 93.4 percent fewer than 100 workers, based on the latest Census Bureau data (2021).

Especially after factoring inflation in, this generally isn't a pretty picture. As SBE Council has said before, the answers don't lie with making matters worse via higher taxes, antitrust activism, protectionism, restricting foreign investment in the U.S., and/or industrial policies. Instead, we need to see an incentivizing and unleashing of American entrepreneurship, business knowhow and hard work. That means a pro-growth agenda of lower taxes, regulatory relief, free trade, and limited government.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II:52 More Quick Reads to Help You Think Like an Economistand The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.

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