New Durable Goods Orders Stall in July

Durable goods orders stalled out in July, in another sign that the economy is cooling, if not already in recession. Economists polled by the Wall Street Journal had expected 1 percent growth.

New orders for manufactured durable goods in July decreased less than $0.1 billion or virtually unchanged to $273.5 billion, according to a report released by the US Census Bureau today. This decrease, down following four consecutive monthly increases, followed a 2.2 percent June increase. 

  • Excluding transportation, new orders increased 0.3 percent.
  • Excluding defense, new orders increased 1.2 percent.

Transportation equipment, down following three consecutive monthly increases, drove the decrease, $0.6 billion or 0.7 percent to $93.0 billion.



New Durable Goods Orders Point to a V-Shaped Recovery

New orders for manufactured durable goods in October increased $3.0 billion or 1.3 percent to $240.8 billion, according to the U.S. Census Bureau. Transportation equipment, up five of the last six months, led the increase, $0.9 billion or 1.2 percent to $77.1 billion.

  • Excluding transportation, new orders increased by 1.3 percent to $163.7 billion.
  • New orders for capital goods increased by $2.2 billion or 2.7 percent to $83.2 billion.

This is the sixth consecutive monthly increase, placing new orders at only 0.3 percent below the same month a year ago. These results surpassed the consensus expectations of a 0.5 percent increase and shows that the economic recovery continues to have unexpected strength.

Economic Growth Leads to Lower Crime

A new study from the International Monetary Fund shows that there is a strong link between economic growth and lower crime. Specifically, the study examines the relationship between crime rates and economic activity in the three “Northern Triangle” countries of El Salvador, Guatemala, and Honduras.

Strong economic activity helps to decrease crime
Source: International Monetary Fund

The driving factor, according to the study, is the cost-benefit analysis for an individual’s choice of finding a lawful job versus a life of crime. In an environment of widespread poverty and lack of economic opportunities, as well as perceived corruption, criminal activity becomes a viable option for some, potentially explaining why crime is high in Northern Triangle countries.

As a result, the study finds that policies that promote more jobs and higher productivity—such as better infrastructure, lower barriers to entry for new firms, and more-efficient tax systems—are key to strengthening and sustaining growth and lowering crime.

Economic Growth vs. Wealth Redistribution

This conclusion is neither shocking nor counterintuitive and should add to debate on whether economic and social polices should focus on economic growth or on wealth redistribution. Unfortunately, too many politicians today push policies that use wealth redistribution to fight inequality, but at the cost of slowing economic growth.

If adopted, these redistributive policies would be counterproductive from their purported goals. The resulting lower growth rates would discourage individuals from looking for lawful jobs instead of opting for a life of crime. Rather than reducing inequality, these policies would cause many of the underprivileged to remain trapped in crime-ridden communities that offer few opportunities for improving their lives.

In the US, this policy debate is likely to manifest itself in this year’s presidential election. Although Bernie Sanders, a self-avowed socialist, is the worse of the lot, all of the Democratic Party presidential candidates are advocating for policies designed from a Marxist-derived emphasis on inequality. President Trump’s policies, which are more focused on encouraging economic growth, are a better long-run solution for actually reducing crime, poverty, and inequality.