The Department of Commerce released their February report of durable good orders today and it looks like we are heading in the right direction. First, lets explain “durable goods.” Durable goods are goods that are meant to last three or more years and do not have to be purchased on a regular basis. This means that consumers and businesses are making bigger purchases and are more confident in the outlook of the economy. Some examples of durable goods are appliances, machinery, cars, lawn mowers, iphones, computers, tools and car parts. These goods do not tend to lose too much value over time. This is why economists look to this report to understand how businesses are doing in the market. If new orders begin climbing, then that could suggest that businesses are making profits and thus the economy is growing. Short and simple for today. Now to the numbers. Keep in mind that economic reports are generally for the month prior.
Orders for durable goods rose 1.7% in February which leads to two consecutive months of increase with January at 2.3%. If we remove orders made by the transportation industry, aircraft for instances, we have orders up by 0.4%. Also, excluding military defense, orders still increased 2.1%. Once should be cautious when comparing percentage changes in the transportation industry. It is quite the volatile sector. All it takes for one aircraft carrier to order more planes greatly change the percentage increase.
New orders coming from businesses seems to suggest the economy is looking to grow even further. Since the new Trump administration has come in, there have been talks about possible tax cuts for business. Perhaps this lead to increased number of orders if they truly believed that these tax cuts where soon to come. However, seeing how the GOP’s healthcare bill could not pass in a Congress controlled by Republicans, then it makes me wonder if tax reform is even feasible.
Michaelnomics 