Business spending on equipment rose in January

REAL ECONOMY BLOG | February 27, 2023

Authored by RSM US LLP

Investments in business equipment posted a sharp rebound in January after two consecutive months of disappointing declines.

While the Commerce Department’s data released on Monday showed some resilience from private businesses, there were reasons to be cautious because January’s data can be quite volatile.

Still, that did not take away from the strength in orders for core capital goods—a proxy for future business investment spending excluding defense and aircraft. Those orders increased the most in five months, rising by 0.8% in January. Shipments of core capital goods also rose by 1.1% on the month after dropping in two straight months.

Earlier market forecasts had showed no change to the orders number and only a 0.2% increase in the shipments number.

durable goods

If similar numbers are seen in the next two months, nonresidential private investment would be a big factor that carries overall gross domestic product growth in the first quarter of the year.

But that is a big “if” because the data is subject to large seasonal fluctuations at the beginning of the year. On top of that, with inflation coming in hotter than expected, a more hawkish Federal Reserve is likely to keep raising interest rates, which should keep investment under more stress than in January.

Inside the data, spending on defense equipment will be an important focus this year after Congress authorized an additional $45 billion for the defense budget in December. The increase will be a much-needed boost to overall growth amid recession concerns.

Orders for capital defense goods rose by 3.8% in January after falling by 1.3% in December. Defense capital goods shipments fell by 1.2% on the month.

Overall orders—including defense and aircraft—dropped by 4.5% in January, mostly because of the spike in Boeing’s orders in December.

Durable goods inventories dropped slightly in January by 0.1% after rising by 0.7% in the prior month because of strong order and shipment numbers. Core capital goods inventories, however, continued to rise since 2020, increasing by 0.3% on the month.

Let's Talk!

Call us at (800) 624-2400 or fill out the form below and we'll contact you to discuss your specific situation.

  • Topic Name:
  • Should be Empty:

This article was written by Tuan Nguyen and originally appeared on 2023-02-27.
2022 RSM US LLP. All rights reserved.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

Weinlander Fitzhugh is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.

For more information on how Weinlander Fitzhugh can assist you, please call (989) 893-5577.

Share This