Big picture: Manufacturers have struggled for the past two years to meet high demand amid a booming economy and ongoing shortages of supplies and labor.
Now demand appears to be slowing and it could continue to slow.
While weaker demand will help ease inflation, it would also curb profits and could force companies to cut jobs, exacerbating any potential downturn in the economy.
Key details: Orders for new autos edged up 0.3% in August, but bookings for aircraft sank 18.5%. The transportation segment is a large and volatile category that often exaggerates the swings in industrial production.
New orders rose slightly outside of transportation. Every major category except for fabricated-metal parts posted an increase.
The rate of growth in business investment is still fairly robust, meanwhile, but it’s not as strong as it looks when adjusted for inflation. It’s also slowed considerably since the U.S. emerged from the shadows of the pandemic.
Investment has increased 8.8% in the past year, the weakest reading since early 2021.
Orders typically rise steadily in an expanding economy and shrink when things go sour.
Looking ahead: The drop in orders “wasn’t as bad as we expected and suggests that business equipment investment is, for now at least, still holding up in the face of surging interest rates,” said senior U.S. economist Andrew Hunter of Capital Economics.
“Unfortunately, it’s increasingly difficult to see that resilience lasting much longer.”