The Commerce Department reported on Wednesday that orders for longer-lasting goods from U.S. factories rose 0.4 percent in April. A big part of that was a surge in aircraft orders, a category prone to huge swings up and down as major airlines make purchases. Excluding transportation, orders were up 0.3 percent.
Orders for core capital goods orders, a category which excludes aircraft and defense purchases, were also up 0.3 percent. Core capital goods are considered a proxy for business investment and therefore a gauge of how businesses see their prospects. If businesses see a recession ahead, core capital goods orders are likely to be weak. If good times are expected to keep rolling, the orders should be strong. Note that there’s a high degree of reflexivity in this. A slowdown in orders for capital goods can actually lower economic output, even bring on a recession. So expectations become reality.
The three-tenths of a percentage point gain was good enough for Bloomberg News to run the headline: "US Durable Goods Orders Rise on Steady Business Equipment Demand." This was almost a repeat of last month’s headline: "Firm U.S. Durable Goods Orders Underscore Resilient Investment." The story explained that the durable goods orders were very good: "Orders placed with US factories for durable goods rose in April, highlighting firm and sustained demand for equipment and merchandise." In Bloomberg’s interpretation, the April numbers indicate that "companies are adhering to capital expenditures plans as they seek to enhance productivity to ease the burden of high inflation and a tight labor market."