MAPI Analysis on Durable Goods: Despite Overall Increase, Concerns Loom About Future Growth
The following is an analysis from Daniel J. Meckstroth, Ph.D., Vice President and Chief Economist for the Manufacturers Alliance for Productivity and Innovation (MAPI), regarding the durable goods report for June 2012. New orders for durable goods rose 1.6 percent.
“On the surface, the June figure for durable goods orders is strong, but the underlying details reveal fundamental weakness in business equipment orders,” Meckstroth said. “More than all the growth was in long lead-time defense capital goods orders and civilian aircraft. The business equipment sectors, such as machinery, computers and electronic products, and electrical equipment posted declining orders. A good indicator of basic business equipment—orders for nondefense capital goods excluding aircraft—fell 1.4 percent in June and fell at a 3.1 percent annual rate from the first quarter to the second quarter of this year.
“A wave of optimism swept over the industrial sector earlier in 2012, but unfortunately, in its wake are concerns about the future slow pace of U.S. economic growth, worries about Europe’s banking crisis, and uncertainty about the resolution of the federal fiscal cliff,” he added. “Even extremely low interest rates are not enough to incentivize businesses to make long-term commitments when there is so much uncertainty and risk.”