Durable Goods Miss in January

Bloomberg details:

Orders for U.S. durable goods fell in January by the most in three years, led by a slowdown in demand for commercial aircraft and business equipment. Bookings for goods meant to last at least three years slumped 4 percent, more than forecast, after a revised 3.2 percent gain the prior month, data from the Commerce Department showed today in Washington.

The expiration at the end of 2011 of a tax incentive allowing full depreciation on equipment purchases may have prompted a slowdown in investment at the start of this year.

Caution always must be taken when analyzing monthly data in that it may just be noise (after all, December's figure and 2011 were strong), but this report was ugly none-the-less.

Source: Census

Durable Goods Grip It and Rip It in December

Reuters details:

New orders for U.S. manufactured goods rose in December and a gauge of future business investment rebounded, showing the U.S. economy ended the year with more momentum than previously thought.

Commerce Department data showed orders for durable goods climbed 3.0 percent last month. That was likely boosted by a surge in orders at aircraft builders like Boeing. Economists had forecast orders rising 2.0 percent.

Strong month, but note that excluding the highly volatile nondefense aircraft component, the index would have been up a (still healthy, yet not as impressive) 1.6%.

Source: Census

Are Equities Ahead of Themselves?

The april durable goods report disappointed (i.e missed estimates and down in absolute terms) yesterday. Per the WSJ:

Durable goods orders were down 3.6% in April, compared with expectations of a 2.2% decline. Last month’s gain was revised up to 4.4% from 4.1%.

This is one more piece of evidence lining up on the side of those seeing a slowdown in the second quarter (and maybe beyond). The upward revisions to March’s numbers do ease the sting a touch, but this could bring down some second-quarter GDP forecasts.

I am less concerned with the figure as Japan weighed heavily (and the down month followed a very strong March), but I am concerned that equities are pricing in VERY strong forward expectations. The chart below attempts to segregate durable good results with companies within the industrials sector (industrials aren't a perfect fit, but pretty good). More specific, the chart compares the rolling two-year change in durable goods (new orders) with the industrials equity sector going back to data from 2005.



Part of the reason for the strong performance has been VERY strong earnings driven less by top line revenue growth, but more by widened profit margins from squeezing out costs (i.e. increased productivity through the laying off of workers) and cheap financing for corporates (see below for the huge supply of bonds at the ten year and in portion of the yield curve).

Investment Grade Corporate Bond Universe



Unless durable goods figures spike to the upside in coming months / years, this sector seems awfully ahead of itself.

to Source: Yahoo Finance / Census

Durable Goods Orders Up... Not Exactly What it Seems

Marketwatch with the details:

Orders for U.S.-made durable goods rose 2.7% in January on stronger demand for civilian aircraft, the Commerce Department reported Thursday. The increase in total orders was very close to the 2.5% gain that was the consensus forecast of economists polled by MarketWatch. This is the first increase in durables in four months. Orders for December were revised up sharply to a decline of only 0.4% from the prior estimate of a 2.3% decline.

Nondefense aircraft orders were up a whopping 4900% (after a crash in December). Without nondefense aircraft, orders were actually down a bit (though smoothing December, durable goods orders were actually up 2% ex nondefense aircraft).



Source: Census

Durable (Not So) Goods

I apologize in advance for the title... it's a Friday and I'm in a weird mood. WSJ details:

Demand for U.S. manufactured durable goods tumbled more than expected in August, held back by steep drops in airplanes and cars.

Durable-goods orders declined by 1.3% to a seasonally adjusted $191.17 billion, the Commerce Department said Friday. This is the biggest drop since August 2009.

Economists surveyed by Dow Jones Newswires expected a 1.0% decline. Friday's report was mixed, as there were gains in machinery, computers and fabricated metal products. Also, a barometer of capital spending by businesses rose; orders for nondefense capital goods excluding aircraft increased by 4.1%.

Still, overall transportation equipment orders dropped 10.3% in August -- restrained by a 40.3% decline in orders for nondefense aircraft and parts. Motor vehicles and parts were also down, falling 4.4%.

August was not as bad as the headline figure would indicate... without non-defense aircraft, durable goods were up 0.6% and without all transportation, durable goods were up 2%.

HOWEVER, the overall trend is ugly with the three month change in durable goods new orders down -0.8% and only two categories showing growth (electronics [thanks Apple!] and fabricated metals).



Source: Census

Durable Goods...No Good

Forbes details:

Orders for big-ticket manufactured goods in July came in weaker than expected, raising the risk that the gross domestic product during the third quarter will not reach 1%, says Michael Feroli, an economist at JPMorgan Chase

On Wednesday the U.S. Commerce Department reported durable goods orders rose by a measly 0.3% in July, well below the 2.5% lift the Street had expected, though still ahead of the 0.1% slip in June.

Shipments of capital goods fell 1.5% on a core basis, which excludes aircraft and defense spending, while orders tumbled 8%.

Transportation (i.e. the only highlight) was distorted by a massive 76% month over month jump in aircraft orders. Without that... not so much.



Source: Census

Durable Goods Off

ABC News details:

New orders for long-lasting U.S. manufactured goods unexpectedly fell for a second straight month in June, posting their largest decline since August, according to a government report on Wednesday that was further evidence economic growth cooled in the second quarter.

The Commerce Department said durable goods orders fell 1.0 percent after a revised 0.8 percent drop in May.

Analysts polled by Reuters had forecast orders increasing 1.0 percent in June from May's previously reported 0.6 percent fall. But non-defense aircraft orders tumbled 25.6 percent in June after falling 30.2 percent the prior month. Overall orders were also pulled down by bookings for computers and electronic products, which saw their largest decline since October.

While not good news, to me this is just noise. Looking at the chart below, which shows the month over month change and three month change by durable good type, we can see that most sectors that fell, fell from sectors that have rebounded over the past three months (transportation equipment, capital goods, machinery, and the overall index).



My take? Things were never really as strong as market participants hoped and they aren't as weak as some may now think...

Source: Census

Durable Goods Mixed... Reverse of April

The AP reports:

Factory orders for big-ticket manufactured declined in May as demand for commercial aircraft dropped off. But excluding transportation, orders rose as manufacturing continued to help drive the recovery.

Demand for durable goods fell 1.1 percent last month, the Commerce Department said Thursday. It was the first decline in six months, following April's strong 3 percent increase.

But without the volatile transportation sector, orders climbed 0.9 percent. The increase was driven by a 5.6 percent uptick in orders for machinery.

As detailed above, the drop in transportation (led by a 30% drop in non-defense aircraft) led the decline after a 200% spike in April.



Source: Census

Durable Goods Orders Mixed in April

The WSJ reports:

Long-lasting goods orders in April rose above expectations, primarily pushed forward by a huge surge in civilian airplanes.

Durable-goods orders increased 2.9% to a seasonally adjusted $193.9 billion, the Commerce Department said Wednesday.

Airplane demand pushed the overall gain, which was bigger than the 2.2% expected. Nondefense aircraft and parts surged 228.0% in April.

Outside of the transportation sector, orders for all other durables decreased 1.0% in April. Yet the report contained evidence of the health in the manufacturing sector -- which has been a leader of the U.S. economy's recovery -- and softened fear lurking about what impact the Greek debt crisis might have on U.S. exports into the euro zone.

Durable Goods (April)

Transportation within Durable Goods (April)



Source: Census

Durable Goods Jump on Continued Strength in Aircraft

The AP details:

Orders for big-ticket manufactured goods rose for a third consecutive month in February, bolstered by strong demand for commercial aircraft and machinery. The
hope is that continued strength in manufacturing will help sustain the economic recovery.

The Commerce Department said Wednesday that orders for durable goods advanced 0.5 percent last month, slightly lower than the 0.7 percent gain that economists had expected.

The increase was led by the second huge jump in demand for commercial aircraft, an increase of 32.7 percent which followed a 134.9 percent rise in this volatile category in January.

Below is the monthly gains by category:



As detailed above, the increase was driven by commercial aircraft (durable goods ex commercial aircraft was down 0.9% for the month) now up 211% since December!

Source: Census

More on Durable Goods

This puts the drop and subsequent rebound in perspective...



Source: Census

Durable Goods... Aircraft Boom (All Else Stagnant) Edition

LA Times reports:

Excluding transportation equipment, new orders for manufactured durable goods slipped 0.6% in January, to nearly $131 billion, after increasing 2% the month before, the Commerce Department said Thursday.

Transportation equipment was a bright spot, increasing 15.6% to $44.8 billion, led by orders for non-defense aircraft and parts.

Overall, new orders rose 3% to $175.7 billion. Shipments fell, however, after four consecutive increases (including a 2.4% rise in December); they slid 0.2% to $180.7 billion in January.

Inventories remained relatively even in January at $302.6 billion after falling steadily over the past 13 months. But stockpiles of computers and electronics plunged 1.2% to $42.9 billion.

Source: Census

Durable Goods / GDP Expectations

Posting has been very light the past few days as "the real job beckoned", but getting pumped for tomorrow's GDP release (yes, I get "pumped" for economic releases).

Unfortunately, I haven't had the time to properly break down the components much, so this is purely going out on a limb based on how things seem to be playing out.

I expect a blowout headline figure (expectations are for 4.7%). Lets call it 5.3%.

Does that mean I believe things are improving at a level that rate would indicate? Of course not (though if that is the figure, CNBC talking heads' heads may explode).

My predictions as to the drivers of the print...

• More downward revisions to past quarterly figures, thus my predicted GDP level is not in actuality 5.3% higher than the current (i.e. as of today) Q3 '09 print
  
• Stimulus induced sectors (think real estate, though autos will be interesting post CFC) making up the majority of the increase with the exception of...
  
• The MASSIVE impact from the inventory rebuild, which I suspect will be revised down in coming quarters as it is realized that the inventory rebuild wasn't all real
• A VERY low (potentially comically low) GDP deflator, thus nominal GDP won't be nearly as impressive on a relative basis as real GDP
  

To shift gears from pretend (i.e. my prediction) to fact, lets take a look at today's durable goods release. Durable goods orders were improved, but below expectations and led once again by the war machine.

Month over Month Change



Putting December '09 into longer term perspective...



Unfortunately, longer term there has not been much (any?) strength outside of the war machine.

Source: Census

Durable Goods Down, But Out?

Catching up on some Thanksgiving week releases and saw that durable goods "surprised" to the downside following the upside spike in September. Per MarketWatch:

Orders for U.S.-made durable goods fell in October, declining 0.6% on weaker demand for machinery and defense goods, the Commerce Department reported Wednesday.

Excluding transportation goods, orders fell 1.3%. Economists surveyed by MarketWatch had expected a gain of 0.5% for durable-goods orders, and a gain of 0.4% for orders excluding transportation.

Overall, the report was "disappointing," wrote Millan Mulraine, an economics strategist with TD Securities, in a research note.

However, better times could be coming, according to Mulraine: "Despite the disappointing October print, we continue to maintain our bias for U.S. capital-goods orders to be fairly robust in the coming months as the combination of the U.S. economic recovery and weak dollar bolsters orders."

The reason why this (and other non-spiking economic indicators) are disappointing is that overall levels are still SIGNIFICANTLY below longer term trends (thus STRONG growth is needed just to make up lost ground). The chart below shows just that; while October durable goods new orders were weak, we see the massive drop YTD October vs. a similar period in 2008, thus plenty of room for a strong rebound if / when the economic recovery truly takes hold.



Not a surprise then that those areas showing relative strength were broadly the same areas that have fallen the furthest.

Source: Census

Durable Goods and GDP / Equity Market Collapse

There have been a number of things pointed at to explain today's sell-off, one being Goldman Sachs reduced GDP forecast. I personally am in the "nothing can go up forever" / "market is overvalued" camp. BUT, here is Goldman via FT Alphaville regarding today's durable goods release:

Headline gain is in line with consensus and below our figure, but with a composition less dependent on volatile components than some (including us) had expected. Bookings for capital goods recover almost all of past two months’ setbacks. Shipments somewhat weaker, especially for nondefense capital goods, but they will eventually follow orders. Based on these data and other recent reports, we now estimate tomorrow’s GDP to be +2.7% at an annual rate, versus +3.0% previously.

And the details of the new orders portion of durable goods for September...



And year to date 2009 vs. that same time frame from 2008 which shows we can at least always count on the war machine.



So durable goods new orders are down almost 30% over that time frame. Rather than ask why the market is selling off today, shouldn't we be asking why the market is UP over the last 12 months?

Anyone think its "fundamentals" and not the MASSIVE liquidity injected by the Fed and no willingness by economic players [i.e. banks / lendees] to put that liquidity to actual use due to immense imbalances that NEED to play out [indebted consumers, asset writedowns, etc...], thus the liquidity is just sloshing into financial assets?

Source: Census

Durable Goods "Surprises" to Downside

We noted last month that the jump in July durable goods came from a spike in commercial plane purchases, thus no surprise here that durable goods came full circle. Thus our surprise that "real" reporters and/or "real" analysts were "surprised".

ABC news reports:

New orders for long-lasting U.S. manufactured goods fell unexpectedly in August, dropping by their biggest margin in seven months, following a plunge in commercial aircraft orders, the government reported on Friday.

The Commerce Department said durable goods orders tumbled 2.4 percent, the largest decline since January, after rising by a revised 4.8 percent in July.

Analysts polled by Reuters forecast orders rising 0.5 percent in August. Compared with the same period last year, new orders were down 24.9 percent.

Source: Census

Durable Goods Jumps

WSJ reports:

Manufacturers' orders for durable goods jumped 4.9% last month to a seasonally adjusted $168.43 billion, the Commerce Department said Wednesday. That was the largest increase since 5.4% in July 2007.

Economists surveyed by Dow Jones Newswires had projected a 3% gain in July orders. Overall durable goods orders for June were revised up, estimated to have declined 1.3% instead of the 2.2% drop previously reported.

As can be seen above, the huge jump came from transportation equipment. Cash for clunkers? Nope. Back to the WSJ:

Transportation-related durables climbed 18.4% in July, the biggest gain since September 2006. Orders for commercial planes soared 107.2%, following a 30% drop the previous month.

Source: Census

Durable Goods... "There Goes the Optimism" Edition

Remember last months jump in durable goods (that turned out to be a jump only in aircraft)? Well, looks like it wasn't so sustainable (or as large as first thought). Reuters details:

New orders for long-lasting U.S. manufactured goods fell more sharply than expected in June, notching their biggest decline in five months as demand for communications and transportation equipment slumped, a government report showed on Wednesday. The Commerce Department said durable goods orders fell 2.5 percent, the largest drop since January, after rising by a revised 1.3 percent in May, previously reported as a 1.8 percent surge. This was worse than market expectations for a 0.6 percent decline. Orders had advanced for two straight months.

Source: Census

Durable Goods... Update

Here's an update to my post on today's durable goods, which puts the "spike" (in aircraft) in perspective (i.e. there was no real spike).



What there does appear to be is a bottom (temporary or permanent TBD) in the speed at which the level of new orders are deteriorating (dblwyo- the 2nd derivative is positive after all!).



Source: Census

Durable Goods Jump = Aircraft Spike

As I mentioned via Twitter, Durable Goods jumped unexpectedly due to aircraft orders. The WSJ with the details:

Manufacturers' orders for durable goods increased by 1.8% last month to a seasonally adjusted $163.92 billion, the Commerce Department said Wednesday.

Wall Street expected a big decrease. Economists surveyed by Dow Jones Newswires had projected orders in May would fall 0.8%.

Durable goods less aircraft was flat to April, still above expectations.

Source: Census