Orders for U.S.-Made Capital Goods in September

On Tuesday, the Commerce Department released a report. It is worth noting mentioning that, new orders for key U.S.-made capital goods rose more than expected in September. Let’s have a look at this report to learn more about the situation.

Importantly, the outcome of next Tuesday’s hotly contested presidential election could also affect business as well as consumer sentiment. Moreover, it has the potential to affect the recovery from the worst recession in at least 73 years.

Interestingly, orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, increased 1.0% in September. Accordion to the updated data for August, so-called core capital goods increased 2.1% instead of 1.9% as previously estimated.

As mentioned above, new orders for core capital goods suppressed expectations. As a reminder, analysts expected core capital goods to increase by 0.5%.

It is worth mentioning that, core capital goods orders rose above their pre-pandemic level. In September, increased demand for primary metals, fabricated metal products, computers, and electronic products, helped to improve the situation. People should take into account that, orders for machinery, components, as well as electrical equipment declined in September.

Capital goods and interesting details

Importantly, shipments of core capital goods added 0.3% in September. Moreover, core capital goods shipments are used to calculate equipment spending when it comes to the government’s gross domestic product measurement. They increased 1.5% last month.

Interestingly, the three straight months of growth in shipments likely helped to lift overall business investment from a deep hole in the third quarter.

Unfortunately, business investment fell at a record 27.2% annualized rate in the second quarter, with spending on equipment collapsing at an all-time pace of 35.9%. People should take into consideration that, investment in equipment contracted for five months in a row.

Hopefully, growth estimates for the third quarter are as high as 35.2% annualized rate, which would regain roughly two-thirds of the output lost because of the coronavirus.

As a reminder, the economy contracted at a 34.4% pace in the second quarter. It is the worst result since the government started keeping records in 1947. Interestingly, the government is scheduled to publish its snapshot of the third-quarter gross domestic product in several hours.

Importantly, orders for durable goods, jumped 1.9% in September. The rebound in orders for transportation equipment helped to improve the situation. The result of the election that will take place in less than one week, has the potential to influence the economy.