There is No Contradiction Between Weak Capital Goods Orders and Investment Growth in First Quarter

The Washington Post noted the 6.0 percent rise in business investment in the first quarter and said that it seems to contradict the drop of 0.1 percent in capital goods orders (excluding aircraft) in March. There actually is no contradiction.

Capital goods orders are forward-looking, indicating businesses' intentions for how much they want to invest over the next year or two, sometimes longer. Their investment in the first quarter is mostly the outcome of investment made in prior quarters.

If...