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....
Source: Census
Thanks for digging into the data. That's quite helpful. dblwyo is the concatenation of my initials and state of birth, no longer residence btw.
ReplyDeleteThe chart itself is fascinating on several fronts - the oil industry has to make capital decisions on a 20-30 year horizon yet they're jumping with this swing ?! And how do they do their investment planning ? Having been on a capital committee or three your assumptions are critical. They only changed their planned oil prices from $20 to $30/barrel when oil was in the $80+ range. And based on the last three decades of experience where over-investment led to over-supply and a price bust that's sound thinking. One has to wonder how much of this is the foreign/national energy companies...especially since we've shifted from a world where the Sisters controlled 70% of the reserves to one where they control ~14% and the rest is behind national political barriers. One of the charts in: http://tinyurl.com/6zmner
dissects what this means for investment potentials btw.
p.s. - it occurs to me to wonder what DG new orders x-aircraft would be net of Oil Machinery. Durable goods orders are trending down still on the whole (btw ignore the inflation meme - did the adjustment and it's not that big a deal). But x-AC it's climbing like a rocket. My speculation was foreign orders and oil equipment.
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