Categorized | Economy

Durable Goods Down 7.6%, Signaling Economic Soft Spot

Business orders for aircraft, machinery and equipment fell 7.9% in July, adding up to just  $226.6 billion. This was largely driven by a 52.3% drop in orders for commercial aircraft.  However, even when this was stripped out, orders for non-transportation durable goods were down .6%.  Nondefense capital goods orders, for just machinery and equipment, also fell 3.3%.These disappointing numbers means that the economy may have hit a soft spot, and signals that businesses are hesitant about purchasing expensive equipment.

However, this downturn follows three months of strong growth:  3.9% in June,   5.5% in May, and 3.6% in April’s 3.6%.

Shipments of previously ordered durable goods were down .3%. July is the first month in the third quarter, so this is not good news for the future Gross Domestic Product (GDP) report. Shipments are an important component of the nation’s economic growth. (Source: Census Bureau, Advance Report on Durable Goods, August 26, 2013)

How This Affects You

The only goods news is that July’s downturn followed three months of strong growth. Therefore, it could just be a temporary soft spot, and August orders could return to the long-term trend. Nevertheless, it’s important to keep an eye on it, and to remain cautious. The durable goods report is the most important leading economic indicator for future GDP growth.

Related Articles

  • Durable Goods as a Component of GDP
  • Other Leading Economic Indicators
  • Types of Manufacturing Jobs

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Source: About.com
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