Why a promising new Commerce Department report is misleading.
The headline from the Commerce Department’s new report on the economy is that new shipments and new orders of durable goods by U.S .manufacturers increased at healthy rates in June – by 15 percent and 7 percent respectively. Larry Kudlow almost certainly will herald the numbers as proof that American manufacturing is back, and good times are just around the corner.
Don’t believe it. Only one industry, motor vehicles and parts, was responsible for almost all of the gains. June shipments of motor vehicles and parts jumped 80 percent from their abysmal levels in May, and new orders increased 87 percent. Set aside that industry, however, and U.S. durable goods manufacturers treaded water or worse in June. Their shipments were up less than 4 percent, and their new orders fell more than 6 percent.
The story is the same for the capital goods that businesses order and buy to maintain or expand operations: In June, shipments by capital goods manufacturers increased 3.5 percent and their new orders fell 16.5 percent.
As everyone in the industrial Midwest knows, all parts of durable goods manufacturing continue to operate at depressed levels. American manufacturers of all durable goods shipped 8.5 percent less in June than in February, before the pandemic and the Trump administration’s mishandling of it. Their new orders were 16 percent lower in June compared to February.
Despite the bounce back in June by manufacturers of motor vehicles and their parts, these companies still shipped 12 percent less in June than in February, and their new orders were 11 percent lower. Finally, manufacturers of capital goods shipped 7.5 percent less in June than February, and their new orders were 28 percent lower in June than February.
The question for Americans during the campaign is one Ronald Reagan asked the electorate forty years ago: Are you better off now than you were both four years ago? Actually, it’s: Are you better off now than you were four months ago? The answer is clear.