Capital Good Shipments: Flat January, Strong Trend

February 24, 2006 – Real U.S. shipments of non-defense capital goods excluding aircraft (an indicator of business fixed investment spending) edged down by 0.1% in January (essentially flat) after a big 3.7% December gain (Chart 1).

Chart 1. Real non-defense capital good shipments ex aircraft. Percent change. Monthly and 3-month moving average. January 2000 through January 2006.

Despite January’s slowing, growth in these shipments averaged 1.4% per month (nearly an 18% annual rate) for the last 3 months.

Compared to the same month last year, real non-defense capital good shipments excluding aircraft rose by a more moderate (but still decidedly sturdy) 4.9% in January (Chart 2).

Chart 2. Real non-defense capital good shipments ex aircraft. Year-ago percent change. January 1987 through January 2006.

As of January, Q1 real shipments of non-defense capital goods excluding aircraft were growing at nearly a 10% annual rate, compared to their Q4 average (+15.7% in Q4, Chart 3).

Chart 3. Real non-defense capital good shipments ex aircraft and real business fixed investment in equipment and software. Annualized percent change. Q1 2000 through Q4 2005 and Q1 2006 to date.

Thus, these data suggest a strong start for real business fixed investment in equipment & software (as measured by the GDP accounts) in Q1.

Suzanne Rizzo

Sources:

U.S. Department of Commerce, U.S. Census Bureau (http://www.census.gov) - manufacturers’ shipments of 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).
U.S. Department of Commerce, Bureau of Economic Analysis (http://www.bea.gov) - real fixed investment in business equipment & software.
National Bureau of Economic Research (http://www.nber.org) - recession dates.