Economic Watch: Business Investment Increasing, Consumer Confidence Soars
A preliminary report shows new orders and shipments for big-ticket manufactured durable goods lost steam in August. Inside the report, however, is some evidence that business investment for the long term is increasing.
Commerce Department figures show the level of new orders for items designed to last at least three years was nearly unchanged from the month before, following a downwardly revised 3.6% increase in July. The performance was better than a consensus estimate by analysts who were expecting a 1.5% drop.
Shipments of manufactured durable goods fell 0.4% in August from the month before, following two consecutively monthly gains, while the July performance was revised slightly lower. This most recent drop was led by a 1.1% drop in shipments of transportation equipment.
Compared to August 2015, new orders last month fell 0.6% while shipments declined by 0.9%.
New orders for non-defense capital goods excluding aircraft, an indicator of business investment, improved a surprising 0.6%, the third straight monthly improvement, while such shipments fell 0.4%. These new orders are down 4% from a year ago while shipments are 5.1% lower.
Weak business spending has been a major factor behind the economy’s subpar growth in recent years, according to the Wall Street Journal, and has been a mystery to economists. It reports, “Some of the weakness is tied to depressed energy prices, which have led to a decline in drilling and exploration, but other factors appear at play.”
Overall, manufacturing in the U.S. remains below where it was earlier in the current economic recovery, with the Institute for Supply Management reporting early this month the sector contracted in August following five consecutive months of expansion. However, a separate report from IHS Markit shows manufacturing is still expanding, but at a slower rate than it was in July.
Consumer Confidence Highest Since 2007
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