MAPI comments on durable goods report
Flat year-over-year growth in non-defense capital goods matches flat equipment and software spending.
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Cliff Waldman, Senior Economist for the Manufacturers Alliance for Productivity and Innovation commented today that, excluding the often volatile demand for transportation equipment, total new orders were up by 1.5 percent and have been modest in recent months. “Given the high degree of uncertainty in the global economic climate and from U.S. fiscal policy, it is something of an upside surprise that orders for long-lasting goods were flat in October, although this number has been volatile in recent months, rising by 9.2 percent in September after a 13.1 percent decline in August,
“In spite of a raft of global economic troubles and the prospect of a fiscal mess in the early part of the new year, orders for non-defense capital goods, excluding aircraft, a proxy for business equipment spending, were up by 1.7 percent in October, although they were flat on a year-over-year basis, corroborating the flat equipment and software spending growth seen during the third quarter of this year,” he added. “Clearly, business decision makers are engaging in just enough capital spending to keep their enterprises going. In a shaky global economy and a highly uncertain U.S. policy environment, there is not going to be much entrepreneurial business expansion of the type that would result from, and reinforce, a strong economic expansion.
“Recent data continue to suggest that U.S. factory sector growth, while having slowed significantly, is at least staying above water,” Waldman concluded. “In October, demand for the output of industry sectors that are fundamental to manufacturing supply chains—such as machinery, primary metals, and fabricated metals—were all positive, although machinery demand was down by 3.3 percent on a year-over year basis. While slow but positive growth remains the most likely path for U.S. manufacturing over the short-term, U.S. and world economies that still have the potential to deliver negative surprises suggest that the risks remain on the downside for U.S. goods producers.”
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