ut if we dig into the manufacturing sector data, we see that the U.S. government ordered 10 submarines from General Dynamics in April; that deal was worth nearly $18 billion. Although the whole order doesn’t count in April’s data, enough of it was allotted to skew the month’s headline number.
Durable goods orders don’t make for lively dinner-party conversation, but they have a huge effect on the economy. In April, the total value of new orders, at an annualized rate, was nearly $250 billion. Relative to March, total orders rose 0.8 percent. But remove defense-related orders, and the total orders posted a decline of 0.8 percent. The General Dynamics submarine contract appears in the “defense capital goods” category, which rose 39.3 percent in April and is up 21.1 percent from a year ago.
We shouldn’t count on big-ticket defense orders to juice durable goods every month; defense spending is likely to decline. The Congressional Budget Office projects that defense appropriations, as a fraction of the size of the economy, will continue to fall in the coming decade.