Wednesday, July 29, 2009

Durable goods orders: not horrible at all!

According to the Census Bureau:
New orders for manufactured durable goods in June decreased $4.1 billion or 2.5 percent to $158.6 billion, the U.S. Census Bureau announced today. This decrease followed two consecutive monthly increases including a 1.3 percent May increase. Excluding transportation, new orders increased 1.1 percent. Excluding defense, new orders decreased 0.7 percent.
But don't get hung up on the headline number -2.5%. Here is what Dean Maki told Bloomberg:
"The manufacturing recovery is happening now,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York, who predicted a gain in orders excluding transportation. Shipments of durable goods “are likely to grow in the third quarter, and that’s an important reason why we expect the overall economy will begin to grow.”
And here is why he is so upbeat on the report: real shipment growth, which goes into GDP if it is produced domestically, is slowly moving to the upper right-hand side of the chart; and real core capital orders, are already trending upward. (Note: calculate the real numbers by deflating the nominal durable goods report by the capital equipment PPI).

I'd say this is a rather strong report, compared to previous ones - of course.

Rebecca Wilder


  1. I disagree. Durable goods are down 25% compared to last year. This was true for all Q2. Don't be surprised when the Q2 GDP report released on Friday is also negative.

    Kimberly Amadeo

  2. Hi Kimberly,

    Of course the Q2 report will be negative - durable goods shipments were down every month. However, the drop in real durable goods shipments saw a remarkable second-derivative improvement in Q2: it halved in the second quarter, from -9.3% Q4 to Q1, to -4% Q1 to Q2.

    The series is moving toward a first-derivative improvement. And into Q3, we may actually see that.

    That, to me, is not horrible...even upbeat.

    Thank you for commenting! Rebecca