Data Analysis

May 26th, 2016 9:24 am | by John Jansen |

Via Stephen Stanley at  Amherst Pierpont Securities:

Durable goods orders surged by 3.4% in April, but the bulk of the increase came from the volatile defense and aircraft sectors.  Defense bookings had spiked from $9.6 billion to $15 billion in March so naturally I projected a pullback.  Instead, the military spending spree continued, as orders were barely off.  It has been 5 years since we have seen such strong back-to-back readings for this category.  Meanwhile, civilian aircraft bookings also jumped, from $10 billion to almost $17 billion, despite the fact that Boeing’s reported orders for the month were lackluster.  Excluding defense and aircraft, durable goods orders managed a 0.6% gain in April, roughly in line with my expectation.  This is certainly better than in recent months (5 of the previous 6 readings had been negative) but nothing to write home about. The strength was led by a pickup in the auto sector.  Excluding transportation, durable goods bookings rose by 0.4%, also roughly in line with expectations.

Unfortunately, while the broad aggregates were somewhat better in April, the core capital goods orders figure sagged by 0.8%, offsetting a 0.7 percentage point upward revision to the March level.  This category has now fallen in five of the last six months and is down 5% year-over-year.  Core capital goods shipments managed a 0.3% rise in April, the first monthly increase since September, but it was offset by a downward adjustment to the March tally.  The April bounce, albeit feeble, suggests that capital expenditures, while still sluggish, may not be quite as weak in the current quarter as in Q1, when real business investment in equipment sank at a disastrous 8.6% annualized clip.  Nevertheless, in my view, tepid is about as good as we can expect, as businesses are likely to sit on their hands to some degree until the political uncertainty is resolved later this year.

Meanwhile, initial unemployment claims slid by 10,000 to 268,000 in the week ended May 21, returning closer to the range seen before the early May blip higher that came out of New York.  Initial claims have averaged 269K so far this year (down from 273K in the second half of 2015 and 284K in the first half of 2015).  So, a gentle downtrend remains in place and the latest reading brings the number of new filers back into the prevailing range.  As always, the labor market is rock solid.

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