Durable Goods Orders

April 26th, 2016 10:11 am | by John Jansen |

Via Stephen Stanley at Amherst Pierpont Securities:

Once again, durable goods orders disappointed.  The headline figure rebounded by 0.8%, on the back of a jump in defense bookings, but the increase was less than expected, as aircraft orders failed to bounce despite a significant increase reported by Boeing.  Excluding the volatile defense and aircraft sectors, durable goods orders sank by 0.7% on top of February’s 0.6% fall.  That makes 5 negative months out of the last six.  The “ex-transportation” component declined by 0.2% in contrast to projections for a small gain.

Core capital goods orders were flat in March, also a disappointment after the 2.7% drop in February (revised from -2.5%).  This aggregate is down 2.4% vs year-ago, but that only scratches the surface of the malaise in business investment.  The March 2016 reading is down 6½% from 2 years ago, is roughly flat vs. 3 years ago, and is down about 5½% from March 2012.  After a calamitous drop during the recession, we saw a nice bounce in equipment investment in 2010 and 2011, but this sector lost momentum almost 5 years ago and has not produced any sustained strength since then.  There are, of course, many possible explanations for this period of weakness, but most of you know that I suspect a big part of the story is a growth-hostile set of tax and regulatory policies, a development that first rose to the forefront in 2011.  Given how little confidence the political environment currently inspires, I would expect that, if anything, investment demand will be even weaker than before between now and November (and possibly thereafter).

Core capital goods shipments managed a 0.3% rise in March, though this pales in comparison to the 1.8% and 1.4% drops in January and February respectively.  I am assuming a 4% drop in real business investment in equipment for Q1 (the GDP report will be released Thursday).  Today’s numbers, if anything, would nudge me lower by a few billion dollars but not by enough to make a difference to my GDP estimate.

Be Sociable, Share!
  1. 1 Trackback(s)

  2. Apr 26, 2016: 2:00PM Water Cooler 4/26/2016 | naked capitalism

Post a Comment