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Investors who are not also goldfish will remember that the preliminary reading for fourth-quarter GDP in the United States unexpectedly contracted 0.1 percent, instead of growing an expected 1.0 percent. This contraction was led by an annualized 6.6 percent decrease in government spending. This cut GDP growth by an estimated 1.27 percentage points.
This makes December’s 110.3 percent increase in defense capital goods orders all the sweeter. Defense spending is a fuzzy area, but the steep increase suggests that first-quarter GDP growth many not be as negatively impacted by sharp declines in government spending.
What’s also worth pointing out is the negative growth in new orders for non-defense capital goods that exclude aircraft. These types of capital goods are generally those that companies purchase when they are investing for future growth — machines to make things.
Monthly ($) in millions
|Dec. 2012||Nov. 2012||Oct. 2012||Nov.-Dec.||Oct.-Nov.||Sep.-Oct.|
|Total Capital Goods||90,030||79,047||80,406||13.9||-1.7||1.4|
|Non-defense Capital Goods||73,591||71,229||72,800||3.3||-2.2||2.6|
|Defense Capital Goods||16,439||7,818||7,606||110.3||2.8||-9.3|
The previous estimate for the November-December change in non-defense capital goods orders excluding aircraft was positive, up 0.2 percent, but the revised figure reported on Monday was -0.3 percent. This is not a tremendous decrease, but it has raised a few eyebrows. The contraction could be an indicator that companies are feeling hesitant about investing as malaise continues to hang heavily on the economy.
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