October Capital Goods: Strong Shipments

November 30, 2005 – Based on yesterday’s data for U.S. durable goods, real non-defense capital good shipments excluding aircraft rose by 2.1% in October, more than reversing September’s 1% decline (Chart 1).

Chart 1. Real shipments of non-defense capital goods excluding aircraft. Monthly percent change. January 2000 through October 2005.

Growth in these capital good shipments averaged 1.1% per month for the 3 months through October – their strongest 3-month gain since February (Chart 2).

Chart 2. Real shipments of non-defense capital goods excluding aircraft. 3-month average percent change. January 2000 through October 2005.

October’s firm 3-month trends in both new orders and unfilled orders for non-defense capital goods excluding aircraft also bode well for future shipments. Real new order growth averaged 1.1% per month for the 3 months through October (the same as shipments) and real growth in unfilled orders averaged 0.9%.

As of October, Q4 real non-defense capital good shipments excluding aircraft were rising at an impressive 18.4% annual rate, compared to their Q3 average (Chart 3).

Chart 3. Real shipments of non-defense capital goods excluding aircraft and real business investment in equipment & structures. Q1 2000 to date.

Although the correspondence isn’t perfect, these data suggest a strong start for real business equipment & software investment in the first month of Q4.

Suzanne Rizzo

Sources:

U.S. Department of Commerce, U.S. Census Bureau (http://www.census.gov) - manufacturers’ shipments, new orders and unfilled orders for non-defense capital goods excluding aircraft.
U.S. Department of Labor, Bureau of Labor Statistics (http://www.bls.gov) - the Producer Price Index (PPI) for finished capital goods (used to calculate real shipments and orders).
U.S. Department of Commerce, Bureau of Economic Analysis (http://www.bea.gov) - real business fixed investment.
National Bureau of Economic Research (http://www.nber.org) - recession dates.