Factory Orders for Nondefense Capital Goods New Orders (Excluding Aircraft) – Easy Trends (thru January 2013)

Factory orders reports provide insight into how busy our factories will be in the coming months.  I’m continuing a feature called “Easy Trends” – a place where I’ll analyze the recent trend for the factory orders report and discuss whether it is currently going up, down or neither.  You can read the basics of my methodology on the FAQ page.

NOTE: You may be reading an outdated analysis.  Please visit my latest factory orders trend analysis for more info.

What are factory orders for nondefense capital goods?  From the USA Today / IHS Global Insight Economic Outlook Index:

Key barometer of business owners’ confidence in the economy.  Tracks how much business owners plan to invest in machinery, computers and other goods.

Why do investors care about factory orders for nondefense capital goods?  Simple – it’s a leading indicator for the economy.  Changes seen in the level of new orders will often mirror changes in the economy several months later.  Why is it “excluding aircrafts” though?  Factory orders for aircrafts come in bursts, so the ups and downs obscure our ability to see the underlying trend in the data.  For that reason, we will subtract factory orders for aircraft out of the equation.

Here’s a graph of the Nondefense Capital Goods New Orders (Excluding Aircraft) from the Federal Reserve Bank of St. Louis for the past five years:

Nondefense Capital Goods Excluding Aircraft New Orders - January 2013 - FRED

Source: StLouisFed.org

Factory Orders Trends and Projections

Below, I will discuss whether factory orders for nondefense capital goods (excluding aircraft) is currently in a trend, when the last confirmed trend was and what that says about projecting the next data point to be released.

Factory Orders Trend Analysis

Quick ‘n Easy

An indicator for how much business owners plan to invest in machinery, computers and other goods appears to be in a rising trend now, though it’s not confirmed.  We now must wait for the next report to see whether it can be confirmed.  Over the last three months, nondefense capital goods (excluding aircraft) has been increasing at about 3 percent of the latest figure.  Because it’s considered a leading indicator, this is potentially great news for the economy through the first half of the year or so.

Nondefense Capital Goods Excluding Aircraft New Orders - January 2013 - Trends

Source Data: U.S. Census Bureau

Current Trend: Nov 2012 – Jan 2013 – During that time, there was an unconfirmed upward trend of about $2.0 billion per month, which is approximately 3.0 percent of the latest month’s figure.

Last Confirmed Trend: Sep – Nov 2012 – During that time, there was a confirmed upward trend of about $1.9 billion per month, which is approximately 2.8 percent of the latest month’s figure.

Projected Next Data Point

The next report is for February 2013.  If the latest trend (excluding off trend data points) extends perfectly, the February 2013 factory orders for nondefense capital goods (excluding aircraft) will be about $69.18 billion, which would be an increase of about 1.9 percent from the latest monthly figure.  That is definitely attainable given the slope of the current unconfirmed trend is actually steeper than that.

Easy Take

The latest reading for January 2013 factory orders for nondefense capital goods (excluding aircraft) has created an unconfirmed rising (good) trend of about 3.0 percent per month.  Because this is considered a leading indicator, it may signal potential strength in the future of the economy in the coming months.  And that would imply good things for the economy through the midway point of 2013.

Share