skip navigation

By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.

April Data and Revisions Downgrade CAPEX Rebound

April durable goods orders showed a mild 0.7% decline, while durables orders excluding the very volatile transportation sector declined 0.4%. Focusing on capital goods, April orders declined 1.9%, though that was due to the very volatile aircraft sector, as capital goods orders excluding aircraft were flat. Just as important as the April news for these series was a set of benchmark revisions that altered the historical path going back a few years.

The effect of all these announcements is summarized in the accompanying chart. Underlying capital goods orders still show some nice rebound from the lows of May 2016. However, the drop in capital goods activity over 2012–16 is now judged to be more serious than previously estimated. More importantly, more of the last year’s rebound is now estimated to have occurred some months ago, and the very recent data show much less continued growth than was previously thought to be the case.

As you can see in the chart, CAPEX orders have been essentially flat since January. Unfortunately, US exports have also been essentially flat since January, after they too saw a nice rebound late last year.

We pay a lot of attention to the manufacturing sector as a driver of all the major swings in US growth. And despite the weak 1Q17 GDP number, we had been heartened so far this year by the continued improvement shown in factory payrolls, factory industrial production, and until recently, factory orders. The main drivers of this budding factory renaissance have been rebounds in capital spending and exports.

The recent data on CAPEX and exports have not been horrible, but neither have they shown continued growth that would point to continued improvement in manufacturing. So, there is some question now regarding how “durable” the 2017 factory rebound will be. As usual, it is not wise to pay too much attention to any one month’s or two months’ number, but with both exports and capital goods holding flat for the last three months, it would be nice to see better data for these in May.

Orders for Nondefense Capital Goods, Excluding Aircraft
Orders for Nondefense Capital Goods, Excluding Aircraft
Source: Census Bureau. As of 30 Apr 17

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 45 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

Sign up to receive email updates as new reports are released.

© Western Asset Management Company, LLC 2022. This publication is the property of Western Asset and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. This publication is for informational purposes only and reflects the current opinions of Western Asset. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorized and regulated by Comissão de Valores Mobiliários and Brazilian Central Bank. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan. Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) (FRN 145930). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK as defined by the FCA. This communication may also be intended for certain EEA countries where Western Asset has been granted permission to do so. For the current list of the approved EEA countries please contact Western Asset at +44 (0)20 7422 3000.