Durable Goods Up

From the Census Bureau:

New orders for manufactured durable goods in May increased $2.8 billion or 1.8 percent to $163.9 billion, the U.S. Census Bureau announced today. This was the third increase in the last four months and followed a 1.8 percent April increase. Excluding transportation, new orders increased 1.1 percent. Excluding defense, new orders also increased 1.4 percent.

The bottom line is this was a good number all the way around. It also gives me hope that we'll start to see a moderation in the industrial production number from the Federal Reserve.

Let's break the chart down in three ways:


First, notice at the end of last year the month over month number dropped hard.

Secondly, the month over month number has started to moderate over the last few months,.

Third, the year over year number bottomed in January has has sat there since. That looks like a bottoming to me.

Are Durable Goods Orders Bottoming?

From the Census Bureau:

New orders for manufactured durable goods in April increased $3.0 billion or 1.9 percent to $161.5 billion, the U.S. Census Bureau announced today. This was the second increase in the last three months and followed a 2.1 percent March decrease. Excluding transportation, new orders increased 0.8 percent. Excluding defense, new orders also increased 1.0 percent.

Granted -- other parts of the report are less rosy.

-- Shipments of manufactured durable goods in April, down nine consecutive months, decreased $0.3 billion or 0.2 percent to $174.2 billion.

-- Unfilled orders for manufactured durable goods in April, down seven consecutive months, decreased $8.9 billion or 1.2 percent to $748.9 billion.

In other words -- we have a long way to go before we're back to normal. But consider the following charts:



Is this a bottom in the month to month chart?


Is this a bottom in the year over year numbers?



This chart better shows the possible bottoming in the year over year numbers.

I want to caution: these are preliminary numbers. BUT, they're still pretty good.

My God But the Press is Stupid

From the Census Bureau:

New orders for manufactured durable goods in March decreased $1.3 billion or 0.8 percent to $161.2 billion, the U.S. Census Bureau announced today. This was the seventh decrease in the last eight months and followed a 2.1 percent February increase. Excluding transportation, new orders decreased 0.6 percent. Excluding defense, new orders also decreased 0.6 percent.

I should call this journalistic malpractice 101. Here's how Bloomberg reported this:

Orders for U.S.-made durable goods fell less than forecast in March, adding to signs the economic slump is easing.

The 0.8 percent decrease reported by the Commerce Department today in Washington compares with an anticipated 1.5 percent drop, according to the median of 68 estimates in a Bloomberg News survey of economists. The news was tempered by revisions to February figures that showed a 2.1 percent gain in orders, smaller than the government previously reported.

Economists project any economic recovery in the second half of the year may be muted as government measures to revive growth will take time to gain traction. General Motors Corp. is planning on idling 13 plants for multiple weeks from May through July, and other companies may keep cutting spending and slash jobs until demand here and abroad shows sustained gains.

Let's look at the chart:



Does anyone see a trend? I know it's hard, especially with that really long DOWNWARD SLOPING TREND LINE but just try and make a guess about what's going on. Of course, the report also said "This was the seventh decrease in 8 months" which would also indicate maybe there's a downward trend in place.

Of course, the fact that new orders are down 27% for the year to date relative to last year to date might also indicate there's a problem.

But no -- we beat economist's expectations. So the sun is shining.

About the Durable Goods Number

There seems to be a fair amount of hoopla about the durable goods number. Let's go to the data as opposed to the spin:

New orders for manufactured durable goods in February increased $5.5 billion or 3.4 percent to $165.6 billion, the U.S. Census Bureau announced today. This increase follows six consecutive monthly decreases, including a 7.3 percent January decrease. Excluding transportation, new orders increased 3.9 percent. Excluding defense, new orders increased 1.7 percent.

-- This is the first increase in 7 months.

-- January's orders dropped hard -- 7.3%

In other words, if we're looking for a trend, it's down. This would be the equivalent of a bear market rally.

In addition, the non-seasonally adjusted numbers for total year to date new orders are down 28.4% -- hardly a great situation. Excluding transportation, that number is -22.4%. In other words, transportation isn't the problem; manufacturing as a whole is.

The uptick is of course welcome news. However, after placing it in context, we learn we have a long way to go before we've seen an industrial rebound.

Durable Goods Orders Fair

From Dow jones

Demand for expensive goods were flat in May, and a barometer of capital spending by businesses retreated, government data on the economy Wednesday showed.

Orders for durable goods didn't change last month, holding at a seasonally adjusted $213.64 billion, the Commerce Department said. Durables, which are manufactured goods designed to last at least three years, decreased 1.0% in April, revised down from a previously estimated 0.6% decrease.

While the data showed orders going nowhere in May, the report was better than Wall Street expected; economists had forecast a drop of 0.5%.

But durable orders have gone up measurably only twice over the past six months, a sign of what the sluggish economy is doing to the manufacturing sector.

A barometer of business equipment spending - orders for non-defense capital goods excluding aircraft - decreased in May by 0.8%, after rising 3.1% in April.

The above chart makes the data a bit easier to understand. First notice the gray lines which represent the month over month change. Notice the lack of overall movement. We've seen a ton of small moves. There was also a big move about 6 months ago, but that was countered by the next months downward move.

Note especially the year over year number. First -- notice the scale on the right. The year over year change has been fluctuating a bit above 0% for the last 9-12 months. Also note the year over year number is in a clear downtrend. The bottom line is this number is slowing.

Sorting Out All the Spin in Durable Goods

There are times when I could literally just scream at the incredible amount of political bullshit that goes on with economic numbers. It just boggles the mind and frustrates the analysis. So, instead of relying on the news media to inform us, we are now faced with the task of sorting through the noise. What fun indeed.

According to the Census Bureau:

New orders for manufactured durable goods in April decreased $1.0 billion or 0.5 percent to $214.4 billion, the U.S. Census Bureau announced today. This was the third decrease in four months and followed a 0.3 percent March decrease. Excluding transportation, new orders increased 2.5 percent. Excluding defense, new orders decreased 0.3 percent.

This is where the first issue comes in. Notice we have the "ex-transportation factor" to deal with. Transportation orders represent about 25% of the durable goods numbers. In addition, transportation orders are very volatile. For example, suppose Boeing gets an order for 25 planes in a particular month. That would spike the overall numbers really high. But that reading would be a bit unrealistic as well because who knows when Boeing would get another order. So -- we usually get the numbers with and without the transportation variable.

What everyone is thrilled about is the ex-transportation number of +2.5%. That made everyone thrilled. But buried in the news headline is this information:

The 4.2% increase in nondefense capital goods excluding aircraft followed three monthly declines in a row. Analysts pointed to export markets, a source of strength for the U.S. with domestic demand weakening.

Given that piece of information, it's just as likely that the increase was a one time event that occurred as overall orders were going down rather than up. At best, the most we can hope for with that piece of information is to wait until next month to see if the upward trend continues.

And then there is this:

Orders rose 4.2% for machinery, 2.8% for primary metals and a record 27.8% for electrical equipment. Orders fell 1.3% for fabricated metals and 1.5% for computers and electronics.

The concentration of strength in orders for electrical equipment prompted Goldman Sachs economists to express some caution "against ascribing too much significance to this report."

So -- the jump is from a few specific areas of the report, not an overall jump in all or a majority of orders. That should tell us something. Reuters adds the following to that number:

However, electrical equipment orders surged 27.8 percent, the steepest increase on record, which analysts attributed to strong overseas demand that has been driven by a weak U.S. dollar. Machinery and primary metals orders also rose.

"The strength of global demand has greatly dampened the extent of the slowdown in manufacturing production, and in the light of today's orders numbers, it will continue to do so," said Nigel Gault, chief U.S. economist at Global Insight.

So -- overseas orders are probably responsible. This has been a good story for the US economy over the last half-year or so -- the increase in exports.

So, let's put all of these facts together to see what we come up with.

Durable goods orders ex-transportation increased 2.5% last month. This was the only increase in this figure in the last four months. Increases in machinery, precious metals and electrical equipment were responsible for the increase in the ex-transportation numbers. The most likely reason for the increase is the long-term downward trend of the dollar which makes US exports cheaper overseas.
Some analysts cautioned not to read too much into this increase because of the small number of areas in the report that contributed to the increase.

In addition, let's look at the general business background to see if all of this excitement about one number is warranted:



First -- the year-over-year change in durable goods is negative.



Companies are doing so well they are shedding workers, and



The unemployment rate is increasing



The ISM manufacturing number is below 50 and has been there a few months. This indicates we're in a contraction.



industrial production is dropping, as is



Capacity utilization



The Philly Fed is not doing as, and neither is the



Empire state survey



Construction spending is weak, as are



After tax corporate profits.

All of the above information says the number was a fluke and not the beginning of a trend. That could change. However, the great weight of the available evidence says no.

Durable Goods Orders Decrease

From the Census Bureau:

New orders for manufactured durable goods in October decreased $0.9 billion or 0.4 percent to $214.5 billion, the U.S. Census Bureau announced today. This was the third consecutive monthly decrease and followed a 1.4 percent September decrease. Excluding transportation, new orders decreased 0.7 percent. Excluding defense, new orders decreased 0.9 percent.

A three month decrease equals a trend -- and not a good one.

Here is a chart from Econoday which puts this in better perspective:



First, notice the gray lines; these are monthly changes. Starting in late last year (roughly October 2006), we started seeing greater vacillations in the monthly numbers. Also notice there are more negative months and the positive months aren't that large. While there are a few spikes here and there, the general trend is down.

Also notice the yearly numbers, which are in the form of a line. I have added a trend line to indicate the year-over-year change is clearly down and has been for the better part of a year.

Factory Orders Drop

From Bloomberg:

Orders placed with U.S. factories fell in August by the most in seven months, raising concern the turmoil in credit markets eroded business confidence.

Bookings declined a greater-than-forecast 3.3 percent after a revised 3.4 percent gain in July that was smaller than previously estimated, the Commerce Department said today in Washington. Excluding transportation equipment such as cars and airplanes, demand declined 1.7 percent after a 1.7 percent gain.

The figures suggest business investment will slow in the second half of the year as a worsening housing recession hurts consumer spending. Economists project Federal Reserve policy makers will lower interest rates again to prevent economic growth from stalling.

``The volatility in financial markets in recent months probably introduced an element of caution in ordering,'' said Michael Moran, chief economist at Daiwa Securities America Inc. in New York.

This news shouldn't be that surprising considering the credit markets over the last few months. The real concern is what will happen over the next few months. If we see this trend continue, then we have a problem.

Durable Goods Orders Decrease 4.9%

From the Census Bureau:

New orders for manufactured durable goods in August decreased $11.3 billion or 4.9 percent to $219.5 billion, the U.S. Census Bureau announced today. This decrease followed two consecutive monthly increases, including a 6.1 percent July increase. Excluding transportation, new orders decreased 1.8 percent. Excluding defense, new orders decreased 5.9 percent.

Here is a chart that shows both the monthly increases and decreases and the year-over-year change.



There are some interesting numbers in the report.

The last report had a 6.1% increase -- 3.4% without transportation. So this decrease isn't as big as it looks on the surface. It's more of a natural slowing down from a big month.

Total new orders are up 1.7% from last year. But total new orders without transportation is down (-.1%). That means that without transportation capital goods new orders would be down for the year. That is cause for concern, especially for economists who argue that exports and the cheap dollar will keep us out of a recession. Transportation accounts for 30% of durable goods new orders. This means that 70% of the durable goods producers are at last years level.

Motor vehicle new orders are down 4.5% from last year.

Durable Goods Orders Decrease

From the Census Bureau:

New orders for manufactured durable goods in May decreased $6.1 billion or 2.8 percent to $213.0 billion, the U.S. Census Bureau announced today. This followed three consecutive monthly increases including a 1.1 percent April increase. Excluding transportation, new orders decreased 1.0 percent. Excluding defense, new orders decreased 3.2 percent.

From Bloomberg:

Orders for U.S. durable goods fell more than forecast in May, casting doubt on the strength of a projected rebound in business investment.

Demand for goods meant to last several years fell 2.8 percent, the first drop in four months, after a revised 1.1 percent gain in April that was larger than previously estimated, the Commerce Department said today in Washington. Excluding transportation equipment, orders dropped 1 percent after rising 2.5 percent.

The decline was led by fewer orders for aircraft, metals, and machinery. A reluctance to buy new equipment, along with a lingering housing slump, may call into question Federal Reserve forecasts for gradual improvement in the economy the rest of this year, economists said. Policy makers, meeting today and tomorrow, are projected to hold interest rates unchanged.

``It's clear that businesses are still somewhat risk averse and that they are being cautious in light of the softness in the economy,'' said Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Massachusetts. ``Capital spending is not moving forward with the strength we had hoped.''

The drop in new orders from the previous month was widespread. Primary metals dropped 3.6%, fabricated metal parts dropped 1%, machinery dropped 1.6%, electrical equipment, supplies and components dropped 3.9%, nondefense aircraft and parts dropped 22.7%.

However, it's important to note these two points.

1.) This is the first drop over the last 4 months. No indicator goes up forever. Buyers could simply be absorbing previous purchases. This makes sense considering the April number was revised up to an increase of 1.1%.

2.) Year to date total new orders are up .5%, excluding transportation are down .3% and excluding defense are up .2%. In other words, we're close to year ago levels for all of the macro-level orders numbers. While businesses aren't seriously increasing their investment, they're also not seriously decreasing their investment.

For those of us who thought business investment would pick-up this year (which includes me) this flashes a yellow warning light. It's not fatal to that conclusion. But another month like this and that conclusion may be called into question.

Durable Goods Orders Surprise On the Upside

From CBS Marketwatch:

New orders for U.S.-made durable goods increased 0.6% in April, boosted by strong demand for metals, the Commerce Department reported Thursday.

Orders in March rose a revised 5%, a six-month high, compared with a 4.3% estimate previously.

Demand in April was held back by a 10.7% drop in orders for civilian airplanes, where new orders had doubled in the previous two months. Excluding the extremely volatile transportation category, orders were up 1.5% in April, identical to the increase in March.

Orders for core capital equipment goods - the best monthly gauge of business investment - rose 1.2% after a 4.4% gain in March.

Here's a link to the actual report.

There are some really interesting points in the report that should be highlighted.

First, the Census Bureau has a spreadsheet download that has unadjusted totals for 2006 and 2007. This means the Bureau has a "year to date" running total on all the different categories.

Year to date, total new orders including transportation are up .4%, but excluding transportation are down .4%.

Here's where things start to get really interesting. Let's use total new orders of $844,523 million as the denominator in the following calculations.

Primary metals are up 6.8% than the same time last year and they make up 9.67% of all new orders.

Electronic equipment and appliances are up 8.6% from the same time last year and they make 5.26% of total new orders.

Fabricated metal parts are up 1% from their total at this time last year and they comprise 12.40% of total new orders.

Transportation is up 2.2%, but that's because non-defense aircraft and parts are up 26.9%. Auto new orders are down 6.1%.

Computer and electronics parts are down 3% compared to the same totals last year and they make up 11.97% of all new orders.

So what does all of this mean? It's largely a commodities driven durable goods market. My guess is foreign demand is responsible for more than a small share of all these orders -- especially orders from China/India and any other country that is manufacturing goods.

Durable Goods Orders Rise

From the Census Bureau:

New orders for manufactured durable goods in March increased $7.1 billion or 3.4 percent to $214.9 billion, the U.S. Census Bureau announced today. This was the fourth increase in the last five months and followed a 2.4 percent February increase. Excluding transportation, new orders increased 1.5 percent. Excluding defense, new orders increased 4.5 percent.

From Bloomberg:

Orders for U.S. durable goods rose more than forecast in March, signaling business spending started to recover as the first quarter ended.

Orders for goods made to last several years increased 3.4 percent after a 2.4 percent gain in February that was larger than previously estimated, the Commerce Department said today in Washington. Orders excluding transportation equipment rose 1.5 percent after a 0.4 percent drop.

``We had been worried that businesses weren't confident enough to invest and this shows better confidence,'' said Adam York, an economist at Wachovia Corp. in Charlotte, North Carolina. ``It's still too early to say manufacturing is completely on the mend, but this is a positive.''

Let's coordinated this data with a few other points.

According to the Federal Reserve's most recent Industrial Production release:

Output in the manufacturing sector moved up 0.7 percent in March; the increase was led by advances in the production of durable goods.

According to the same report, final products of consumer durables orders

1.) The 4th quarter 2005 - 2006 year-over-year comparison was a decrease of 2.5%

2.) The annual rate in the first quarter of 2007 was a 0% increase, and

3.) The March 2006 - March 2007 comparison was down 1.3%.

We also have the following numbers in the business equipment sector:

1.) The 4th quarter 2005 - 2006 year-over-year comparison was an increase of 9.7%

2.) The annual rate in the first quarter of 2007 was a -.5% decrease, and

3.) The March 2006 - March 2007 comparison was an increase of 7.4%.


In addition, we have the following comparisons in the final products of materials durable goods orders:

1.) The 4th quarter 2005 - 2006 year-over-year comparison was an increase of 5.6%%

2.) The annual rate in the first quarter of 2007 was a 2% increase, and

3.) The March 2006 - March 2007 comparison was up 3.6%.

The materials orders are twice the size of the consumers durables -- 19.15% versus 7.16%. The materials orders are twice the size of the consumers durables -- 19.15% versus 9.95%.

At the same time, we have the following chart from Martin Capital:

Business Investment Weakening

From Business Week:

Business outlays for new equipment and facilities have slowed sharply over the past year. That's important because when businesses expand their operations they also add to their payrolls. Job growth over the past couple of years has been the primary support under consumer spending, so any sharp slowdown in capital spending would most likely have an even broader impact on consumers than the weakness in housing.

Inflation-adjusted expenditures for things like computers, heavy machinery, factories, and warehouses grew only 3.9% per quarter during the final three quarters of 2006, after increases averaging 8.2% in the previous three quarters. Spending in the final quarter of 2006 dropped for the first time in almost four years, and there's more weakness to come. In January and February, orders for capital equipment have fallen sharply, putting them far below their fourth-quarter level and suggesting the economy will struggle to reach a 2% growth rate in the first quarter.

Here is a chart of durable goods orders.



This is not welcome news.

Durable Goods Orders Disapppoint

From Bloomberg:

U.S. durable-goods orders excluding transportation unexpectedly fell for a second month in February, jeopardizing the Federal Reserve's forecast for a recovery in investment.

The 0.1 percent drop followed a 4.0 percent slide a month earlier, the Commerce Department said in Washington today. None of the 35 economists surveyed by Bloomberg News predicted the decline. Orders for all durable goods -- those made to last several years -- rose 2.5 percent, less than analysts anticipated.

Companies are reluctant to buy new machinery and equipment until inventories are reduced, suggesting the economy may slow further, economists said.

``This raises a major warning flag for the economy,'' said Douglas Porter, deputy chief economist at BMO Capital Markets in Toronto. ``It casts some serious doubt on what had been a leader for the economy in the last year or two.''

First, the Year-over-year percent change in new orders was -.27%. Ex-transportation, the YOY change was +.68%. These numbers are not seasonally adjusted. Here's where the problem lies (also a link to the Census report):

Inventories of manufactured durable goods in February, up twelve consecutive months, increased $0.5 billion or 0.2 percent to $298.0 billion. This followed a 0.4 percent January increase.

12 straight months of inventory builds indicates 1.) there isn't a need for new orders -- and may not be for awhile, and 2.) the sell side of inventories is slowing.

Durables Goods Orders Drop

From Bloomberg:

Durable-goods orders fell 7.8 percent in January, reflecting the biggest slide in business equipment demand in three years, the Commerce Department said in Washington. At the same time, the Conference Board's consumer-optimism index unexpectedly increased to the highest level in more than five years, and the National Association of Realtors said existing- home sales rose more than forecast.

Durable-goods orders excluding transportation equipment dropped 3.1 percent, the most since July 2005. Excluding military equipment, orders fell a record 7.8 percent last month, while inventories of all durables rose 0.3 percent.

Reluctance to Invest

The figures suggest reluctance among companies to invest carried into 2007 after spending on equipment such as computers, machines and communications gear fell by the most in four years in the fourth quarter. Bloated stockpiles at auto dealers and construction-equipment makers may restrain production early this year, Bernanke told Congress this month.

These numbers are great cause for concern. Industrial production decreased .5% last month. Now we have a drop in durable goods orders, further indicating a manufacturing slowdown. The ISM number -- which comes out later this week -- has hovered around 50, which indicates contraction. The Fed surveys have been mixed this month.

Durable Goods Orders Increase 3.1%

From the Census Bureau:

New orders for manufactured durable goods in December increased $6.7 billion or 3.1 percent to $221.9 billion, the U.S. Census Bureau announced today. This was the fourth increase in the last five months and followed a 2.2 percent November increase. Excluding transportation, new orders increased 2.3 percent. Excluding defense, new orders increased 3.9 percent.

These numbers jib with the Fed's industrial production figures for December.

Excluding transportation, the overall number has decreased each month for the last three months. This indicates how important Boeing is to the US economy.

There was a big drop in semi-conductors (down 22%), but semis increase big two months ago (up 29.2%). My guess is producers are still working off that inventory.

There was also a big drop in computers and related equipment (down 5.7%). Communication equipment dropped 10.7%,Considering how important technology is to the latest stock market rally, this does not bode well for the coming trading week.

We saw a good increase in auto production (up 5.8%). This is probably a production increase in anticipation of new models.

Thank-God foreign airlines are buying planes.