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While consumers sit on their wallets, businesses spend

posted on September 27, 2010 at 2:03 pm
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economic recovery

The bifurcated U.S. economic recovery keeps on bifurcatin’.

While the U.S. consumer still can’t seem to open his or her wallet (and with official unemployment stuck near 10%, who can blame consumers for being hesitant about spending), businesses keep on ordering capital equipment.

Orders for capital equipment, the stuff that businesses buy to expand or improve their businesses, rose 4.1% in August, according to data from the Commerce Department reported on September 24. That reverses a 5.3% drop in July that was itself revised down from initial estimates.

The top line total orders for durables of all kinds fell in August by 1.3% due to lower demand for airplanes. Boeing recorded 10 orders in August against 130 in July. That’s typical volatility for the aircraft sector. But taking out the volatile transportation sector to look just at a measure called total durable orders ex-transportation shows a 2% increase in orders for August.

Orders for non-defense capital goods excluding aircraft, the most useful measure to watch if you’re trying to predict the pace of business investment, has now climbed at s 15% annual race over the last three months. That’s down from the 24% annual rate for May, June, and July, but certainly isn’t the kind of drop that you’d expect if business were expecting a double-dip recession.

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One comment

  • herbertbernard on 28 September 2010

    I completely agree that the economic problem America is having is that we are losing so many of our high paying jobs overseas. America can’t open their wallets because they don’t have the money. Credit cards and home equity loans can only go so far. The other problem is that the President does not have a clue. We need strong economic leadership on top otherwise this problem will get so bad that it will spin out of control. We need to keep manufacturing here in the US and drill for our own oil. Sad but true, America the greatest will become America–once the greatest.

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