May Capital Good Shipments

June 23, 2006 – U.S. real non-defense capital good shipments excluding aircraft (an indicator of real business fixed investment in equipment & software, in the GDP accounts) edged down by 0.2% in May after a 0.6% April gain (Chart 1).

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

Despite the latest month’s slowing, the trend in these shipments stayed firm. Growth averaged a robust 0.8% per month (a 9.7% average annual rate) for the three months through May (Chart 2).

Chart 2. Real non-defense capital good shipments excluding aircraft. Percent change. Three-month moving average. January 2000 through May 2006.

Real non-defense capital good shipments excluding aircraft rose by a sturdy 7% in May, compared to the same month last year (Chart 3).

Chart 3. Real non-defense capital good shipments excluding aircraft. Year-ago percent change. January 1969 through May 2006.

Compared to their Q1 average, these shipments rose at a solid 5.8% annual rate for the first two months of Q2 (Chart 4).

Chart 4. Real non-defense capital good shipments excluding aircraft and business fixed investment in equipment and software. Annualized percent change. Q1 2000 through Q1 2006 and Q2 2006 to date.

Bottom line: Still on track for continuing good growth in real business equipment & software investment in Q2. However, the slowdown shaping up in the consumer sector will carry a much larger weight in Q2 real GDP growth.

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, consumption and GDP.
National Bureau of Economic Research (http://www.nber.org) - recession dates.