August new orders for durable goods fell but orders for capital goods rebounded

New orders for durable products, such as cars and fridges (designed to last more than three years), fell in August by 18.2% to a seasonally adjusted $245.43 billion, according to the Commerce Department.

The Wall Street Journal had surveyed a group of economists who had predicted a fall of 17.5% from July.

There were high aircraft orders in July which dropped in August, with orders for non-defense airplanes and parts down by 74.3% in August compared to a 315.6% surge in July. Boeing Co. ordered 324 units in July compared to only 107 in August.

New orders for motor vehicles and auto parts declined by 6.4% in August after a 10% rise in July.

However, if you exclude the volatile transportation category orders increased by 0.7% in August, compared to a 0.5% fall in July.

---

---

In addition, new orders for non-defense capital goods excluding aircraft increased by 0.6% in August, which is considered to be one of the main indicators of business investment.

With orders for capital goods by U.S. businesses rebounding in August, along with the recent news that there has only been a small increase in the number new filing claims for unemployment benefits, there has been a lift in the economic outlook of the U.S.

Capital Economics chief U.S. economist Paul Ashworth said:

“Stripping out the aircraft-related volatility, the underlying strength in capital goods orders and shipments in August indicates that business investment in equipment continues to expand at a healthy pace in the third quarter.”

Capital goods are things that businesses buy to either increase productivity, produce goods, or provide services. Examples include computers, equipment, machines, vehicles, and buildings.

TD Securities economist Millan Mulraine said:

Thursday’s report signaled “steady gains in capital investment activity which we see as a very important factor in driving the rotation in the driver of the economic recovery from consumer spending to investment activity.”

So far, there has been an 8.1% rise in overall durable-goods orders in 2014 compared to the first eight months last year.