According to the United States Department of Commerce a measure which presently tracks business spending climbs increased by 0.8 percent, last month, after jumping twice as much—1.5 percent—the month before that.
As such, all order for durable goods—these are goods which are intended to last longer than three years—fell by 0.4 percent, largely as the result of a sharp fall in the demand for defense aircraft, often a volatile category. Of course, civilian aircraft is also a volatile category and it rose 42.4 percent, in December (over the previous month).
Outside of the transportation sector, though, orders rose 0.5 percent but were still down 0.3 percent on the year. Outside of transportation, orders rose 0.5% in December, but were down 0.3% for the full year. This marks the sixth straight month of gains.
According to Berenberg Capital Markets economist Mickey Levy, “Prospects for future activity look better than they have in some time.” Additionally, all unfilled orders for the same capital goods category are also swinging upward, as he notes, “pointing to the need for companies to increase activity for what seems to be better demand.”
Growth in business investment trudged behind a much broader economic growth through most of last year. Firms were probably cautious; though they might relent as investment accelerated through the fourth quarter. And now, as we begin the New Year—and a new presidential administration—firms will probably continue to hold back, a little, with a mixed outlook on the year. Some, of course, are optimistic that the proposed tax code changes and infrastructure pledges will support the wavering manufacturing base.
And the dollar has strengthened since the election. That is a very important metric. A strong dollar improves the cost of domestic-made goods to foreign buyers.
Amherst Pierpont Securities economist Stephen Stanley notes, “I expect a friendlier policy environment to spur an acceleration in investment outlays in 2017. Though the full unleashing of pent-up activity may not come until corporate tax reform makes its way through Congress.”
Demand from consumers for vehicles has been relatively strong, partially helping to offset uneven overseas orders for manufactured goods.
Orders for motor vehicles and parts rose 2% in December, and were up 2.7% in 2016 versus 2015.