5.9 C
New York
Friday, March 29, 2024

December Durable Goods: A Major Disappointment

Courtesy of Doug Short.

The January Advance Report on December Durable Goods released on today by the Census Bureau was a major disappointment. Here is the Bureau’s summary on new orders:

New orders for manufactured durable goods in December decreased $8.1 billion or 3.4 percent to $230.5 billion, the U.S. Census Bureau announced today. This decrease, down four of the last five months, followed a 2.1 percent November decrease. Excluding transportation, new orders decreased 0.8 percent. Excluding defense, new orders decreased 3.2 percent.

Transportation equipment, also down four of the last five months, led the decrease, $6.8 billion or 9.2 percent to $66.7 billion. Download full PDF

The latest new orders headline number came in at -3.4 percent, well below the Investing.com estimate of 0.5%. This series is up a fractional 0.3 percent year-over-year (YoY). However, if we exclude transportation, “core” durable goods came in at -0.8 percent MoM, also below forecast. Without the volatile transportation series, the YoY core number was up 3.8 percent.

If we exclude both transportation and defense for an even more fundamental “core”, the latest number was down -0.4 percent MoM but up 2.5 percent YoY.

The Core Capital Goods New Orders number (nondefense capital goods used in the production of goods or services, excluding aircraft) is another highly volatile series. It was down -0.6 percent MoM, its fourth consecutive month of decline, and up only 1.7 percent YoY.

The first chart is an overlay of durable goods new orders and the S&P 500. We see an obvious correlation between the two, especially over the past decade, with the market, not surprisingly, as the more volatile of the two. Over the past year, the market has certainly pulled away from the durable goods reality, something we also saw in the late 1990s.

Click to View
Click for a larger image

An overlay with unemployment (inverted) also shows some correlation. We saw unemployment begin to deteriorate prior to the peak in durable goods orders that closely coincided with the onset of the Great Recession, but the unemployment recovery tended to lag the advance durable goods orders.

Click to View
Click for a larger image

Here is an overlay with GDP — another comparison I like to watch.

Click to View
Click for a larger image

The next chart shows the percent change in Core Durable Goods (which excludes transportation) overlaid on the headline number since the turn of the century. This overlay helps us see substantial volatility of the transportation component.

Click to View
Click for a larger image

Here is a similar overlay, this time excluding Defense as well as Transportation (an even more “core” number).

Click to View
Click for a larger image

This last chart is an overlay of Core Capital Goods on the larger series. This takes a step back in the durable goods process to show Manufacturers’ New Orders for Nondefense Capital Goods Excluding Aircraft.

Click to View
Click for a larger image

In theory the durable goods orders series should be one of the more important indicators of the economy’s health. However, its volatility and susceptibility to major revisions suggest caution in taking the data for any particular month too seriously.

Subscribe
Notify of
0 Comments
Inline Feedbacks
View all comments

Stay Connected

157,450FansLike
396,312FollowersFollow
2,280SubscribersSubscribe

Latest Articles

0
Would love your thoughts, please comment.x
()
x