The February Advance Report on January Durable Goods was released this morning by the Census Bureau. Here is the summary on new orders:
New orders for manufactured durable goods in January decreased $8.6 billion or 4.0 percent to $206.1 billion, the U.S. Census Bureau announced today. This decrease, down following three consecutive monthly increases, followed a 3.2 percent December increase. Excluding transportation, new orders decreased 3.2 percent. Excluding defense, new orders decreased 4.5 percent.
Transportation equipment, down following two consecutive monthly increases, had the largest decrease, $3.6 billion or 6.1 percent to $55.2 billion. This was due to nondefense aircraft and parts, which decreased $3.8 billion.Download full PDF
The new orders at -4.0 percent came in significantly worse than the Briefing.com consensus estimate of -1.4 percent. This is the largest monthly decline since January 2009. Likewise the ex-transportation -3.2 percent was far below the consensus forecast of 0.2 percent.
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.
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.
An overlay with GDP shows some disconnect in recent quarters between the recovery in new orders and the slowdown in GDP — another comparison we’ll want to watch closely.
The next chart shows the percent change in orders with and without transportation (namely vehicle orders) since the turn of the century.
Now let’s exclude defense orders.
And finally, let’s look at core durable goods orders, excluding both Transportation and Defense.
In theory the durable goods orders series should be one of the more important indicators of the economy’s health. But its susceptibility to major revisions of the previous monthly data suggestions caution in taking the data for any particular month too seriously.
Images: Flickr (licence attribution)
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My original dshort.com website was launched in February 2005 using a domain name based on my real name, Doug Short. I’m a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired byAdvisor Perspectives, where I have been appointed the Vice President of Research.
My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early ’80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn’t refuse.
Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006.
Contrary to what many visitors assume based on my last name, I’m not a bearish short seller. It’s true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool