A double shot of bad news was released today with durable goods orders plunging and unemployment claims soaring. Please consider Durable Goods Orders Drop for Sixth Consecutive Month.
Orders for U.S. durable goods fell for a record sixth consecutive month in January, signaling companies are cutting back on spending as customers worldwide retrench.
The 5.2 percent drop was more than twice as large as projected and followed a 4.6 percent decrease the prior month, the Commerce Department said today in Washington. Comparable data began in 1992. Excluding transportation equipment, orders fell 2.5 percent.
“Businesses are cutting back everyplace they can in order to survive the recession,” said Tim Quinlan, an economist at Wachovia Corp. in Charlotte, North Carolina. “The slowdown in business spending at the end of last year apparently picked up speed at the beginning of the year.”
Demand for non-defense capital goods excluding aircraft, a proxy for future business investment, plunged 5.4 percent after falling 5.8 percent the prior month. Shipments of those items, used in calculating gross domestic product, dropped 6.6 percent.
Orders excluding defense equipment decreased 2.3 percent and bookings for military gear dropped 35 percent.
Transportation equipment demand slumped 13.5, with autos down 6.4 percent for a second month. Commercial aircraft orders surged 82 percent following a 59 percent drop.
Today’s report showed orders for metals, machinery and computers also dropped. Only communications gear and aircraft advanced.
Tight credit and a global recession indicate demand for aircraft is likely to slump in coming months. Boeing Co., whose new 787 Dreamliner is now almost two years behind schedule, said Feb. 19 it lost another order for the plane in the prior week, bringing total cancellations to 33.
“Cancellations are especially affecting aircraft makers and other heavy industries like mining as customers feel the credit pinch,” said Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts.
Today’s report also showed order backlogs dropped and companies cut stockpiles. The 0.8 percent decline in inventories was the biggest since September 2003. Unfilled orders fell 1.9 percent, the most since January 2002.
Smaller backlogs indicate manufacturing will be slow to recover even after the economy gains traction.
Weekly Claims Hit 667,000
Inquiring minds are investigating the latest Weekly Unemployment Claims statistics. Here are the grim details.
In the week ending Feb. 21, the advance figure for seasonally adjusted initial claims was 667,000, an increase of 36,000 from the previous week’s revised figure of 631,000. The 4-week moving average was 639,000, an increase of 19,000 from the previous week’s revised average of 620,000.
The advance number for seasonally adjusted insured unemployment during the week ending Feb. 14 was 5,112,000, an increase of 114,000 from the preceding week’s revised level of 4,998,000. The 4-week moving average was 4,932,250, an increase of 89,250 from the preceding week’s revised average of 4,843,000.
The best numbers to watch are the 4 week moving averages because they smooth out minor week to week fluctuation noise. The numbers are ticking up substantially. A year ago the numbers were bad, and they are far worse now.
Signs are in place suggesting another 500,000 jobs or more will be lost in the next monthly BLS jobs report.
Mike “Mish” Shedlock
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