dblwyo (I would love to know what that stands for) left the following question in response to our post on durable goods:
Have you considered that the increase in machinery orders might be largely driven by oil equipment? And as the largest component increase that would make the numbers look even worse.Lets take a look...
dblwyo was correct, new orders for mining, oil, and gas field "MOG" machinery rose 48% in June compared with June 2007, significantly higher than machinery as a whole. On a rolling 12 month basis, new orders for MOG machinery have trended up since the beginning of 2008 (interestingly shipments have yet to follow...). This ended a downward trend for both new orders and shipments that began at the end of 2006.
One can see the strong inverse relationship between the growth trend in MOG machinery ordered / shipped vs. the price of oil. My guess is that machinery orders have lagged the price of oil in the following manner:
- When the price of oil was flat, machinery orders trended down as oil companies worried about their bottom line expenses
- When oil prices spiked earlier this year, new orders followed as companies played catch up
Thanks for post dblwyo....