Watch the Macroeconomy, but Watch 'Your World' Too

For a snapshot of the business-to-business sector of the economy, we typically look at US Nondefense Capital Goods New Orders. New Orders recently put up some decent numbers considering the restrictive monetary policy that has characterized the post-COVID era. The New Orders 12-month moving total ticked up in February to $884.4 billion, and the 12/12 rate-of-change also ticked up slightly.

However, to understand business-to-business spending simply as a single dataset is to have an incomplete picture. There are a large number of markets in the business-to-business sector, and when we look at these markets individually, it is evident that they are exhibiting disparate trends. Some are faring well, and some not so well.

Currently rising on a 12MMT basis are:

• Heavy-Duty Trucks
• Electronic Computers
• Engines, Turbines, Generators, and Other Power Generation Equipment
• Construction Machinery
• Electrical Equipment, Appliances, and Components

Flattening out:

• Mining Machinery
• Electrical Equipment
• Electromedical, Measuring, and Control Instruments
• Search and Navigation Instruments
• Communications Equipment

Declining:

• Metalworking Machinery
• Industrial Machinery New Orders
• Farm Machinery
• Photographic Equipment

Is there a pattern here? Potentially. Some of the rising markets are closely associated with infrastructure.

• Heavy-Duty Trucks, for example, transport the aggregates, culverts, I-beams, and other goods and materials used to build, enhance, and maintain roads, bridges, and other means of connection that keep the economy running.
• Construction Machinery prepares the ground for these components and maneuvers them into place.

Infrastructure efforts are benefiting from the federal Infrastructure Investment and Jobs Act, which was signed into law in late 2021 and will help fund infrastructure projects through the federal government’s fiscal year 2026.

About the other rising markets:

• Electrical Equipment and Appliances factor into an ongoing push to shift reliance toward renewable energy, which is tied to increasing electrification (solar and wind power do not fuel traditional boilers, for example).
• Computers are part-and-parcel to the tech industry and closely associated with semiconductor research

The renewables push is receiving some help from the federal government, with portions of funding from both the infrastructure bill and the CHIPS and Science Act allocated toward renewable energy. Furthermore, a large portion of CHIPS funding is devoted to encouraging and sustaining the domestic production of semiconductors.

And the markets that are flat or declining:

Many – such as metalworking machinery, mining machinery, and industrial machinery, are associated with heavy traditional industrial uses. These applications are not currently benefiting from government stimulus measures. Furthermore, it makes sense for these markets to be stagnating or declining as the industrial sector faces headwinds related to high interest rates and weakened consumer goods new orders.

Looking forward to the rest of 2024 and beyond, what will ultimately matter to you is not necessarily what happens in the broad category of “business-to-business spending,” but rather what happens in “your world” – your markets and your business.

This cycle in particular, it is less useful to look at “the economy” as a consistent force that will have basically the same impact on all businesses. If you want to effectively mitigate your risks and position yourself for opportunity, a more specialized approach will be necessary.

If you are looking for reliable economic intelligence and accurate forecasting for your market of operation, then you should talk to us.