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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.

August Durable Goods Orders Show Continued Growth in Capital Spending and in Manufacturing

New orders for durable manufactured goods rose 1.7% in August, with no revisions to the July level. Excluding the very volatile transportation equipment sector, durables orders were up 0.2%, on top of a +0.2% revision to July. Within durable goods orders, business capital spending is measured via orders for nondefense capital goods (excluding aircraft and parts), and this measure rose 0.9%, with a +0.1% revision to July.

None of these numbers are spectacular, but each of them continues a pattern of growth that has been in place for over a year now. Both capital spending in particular and manufacturing activity in general had shown zero growth—actually some declines—from early-2012 through the middle of 2016, but both have been rising fairly steadily ever since.

Our take on the overall economy is heavily driven by developments within manufacturing. Though only a slight share of total employment, the factory sector accounts for the lion’s share of swings in overall economic growth, so the renewed growth in manufacturing activity over the past year has been a welcome change.

The factory sector rebound in late-2016 was driven by renewed gains in both capital spending and exports. Exports stalled out around the beginning of 2017, but capital spending has continued to grow, and, lately, the gains there have been accompanied by inventory rebuilding.

Inventory rebuilding runs don’t go on forever, and we have some concerns that a factory sector rebound driven by capital spending alone will be uneven and tenuous. For now, though, those concerns seem to be whistling in the wind. Overall factory payrolls are growing nicely recently, and so are factory orders and production. Though hurricane effects will likely distort the factory sector data in the next two months, overall manufacturing trends are the best we have seen since the outset of the expansion.

Orders for Nondefense Capital Goods
Orders for Nondefense Capital Goods
Source: Census Bureau. As of 31 Aug 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.

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