Nick Nasad
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Capital Goods Orders Continue to Be Weak Implying Firms Lack Confidence

One concern for the US economy going forward continue to be the weak pace of capital goods orders. This is a phrase that describes the machinery and equipment that companies need in order to upgrade their factories and their production capacity. Durable goods are any goods meant to last more than 3 years, so we have to go to a very specific part of the report to get the capital goods orders figure. It is under Capital Goods Order excluding defense and airplanes - since we don't want purchases for the military and the large capital goods (airplanes) skewing the metric.

So, what do we see over the last 3 months? Well, orders for capital goods were down 1.1% in September, after rising 0.4% in August, and being down a 3.5% (highlighted in the images above). You can also see how keeping aircraft in the figure skews things as capital goods ex. military rose 6.9%.

Here is a chart of shipments (not orders) of these capital goods and we are certainly seeing weakness:

(h/t to ZeroHedge)

The question then is... are companies not confident in the economy enough to purchase more machinery and equipment? For a recovery to gather pace, this is one of the key metrics to watch, and so far it is not pointing to much optimism among firms. Something to think about.

- Nick