- June 24, 2021
- Posted by: Stratford Team
- Category: Business
Robots at a trade show. (PATRICK LUX/AFP via Getty Images)
AFP via Getty Images
The latest report on durable goods orders shows a surge of capital expenditures by businesses. Orders are not just rebounding from the pandemic, they are far exceeding pre-pandemic levels. Non-defense capital goods excluding aircraft are running more than ten percent above 2019 levels. (Aircraft are excluded in the most common measure because of their high variability from one month to another, and because many of the orders are for export.)
Companies purchase capital equipment for three reasons: to replace aging equipment, to add capacity, or to substitute equipment for labor. In today’s tight labor market, automation is the big story.
Replacement of old equipment is fairly stable. Variability from one year to the next reflects companies’ cash positions and outlook for the future. In tough times, a business nurses old equipment for another year. In good…
