Inquiring minds are digging into the latest Durable Goods Report by the Census Bureau.

New orders for manufactured durable goods in June increased $9.9 billion or 4.2 percent to $244.5 billion, the U.S. Census Bureau announced today. This increase, up four of the last five months, followed a 5.2 percent May increase and was at the highest level since the series was first published on a NAICS basis in 1992. Excluding transportation, new orders increased slightly. Excluding defense, new orders increased 3.0 percent. Transportation equipment, also up four of the last five months, led the increase, $9.9 billion or 12.8 percent to $87.1 billion. This was led by nondefense aircraft and parts, which increased $6.5 billion.

Durable Goods Seasonally Adjusted

Durable Goods Seasonally Adjusted
Monthly Percent Change
June 2013 May 2013 April 2013 May-June April-May March-April
Total:
Shipments………… 229,757 229,773 226,915 0.0 1.3 -0.6
New Orders………… 244,494 234,581 223,003 4.2 5.2 3.6
Excluding transportation:
Shipments………… 160,646 160,465 160,211 0.1 0.2 -0.4
New Orders…………… 157,420 157,369 155,774 0.0 1.0 1.8
Excluding defense:
Shipments……… 217,464 217,701 215,110 -0.1 1.2 -0.3
New Orders……………… 230,302 223,629 213,124 3.0 4.9 2.6
Manufacturing with unfilled orders:
Shipments…… 161,645 161,836 158,586 -0.1 2.0 -0.9
New Orders……… 183,051 173,160 161,842 5.7 7.0 4.8
Primary metals:
Shipments………… 24,915 24,379 24,698 2.2 -1.3 0.6
New Orders……… 25,405 25,466 25,307 -0.2 0.6 2.3
Fabricated metal products:
Shipments……… 28,943 29,009 29,090 -0.2 -0.3 2.2
New Orders…… 29,617 29,593 29,712 0.1 -0.4 1.2
Machinery:
Shipments………… 34,217 34,624 34,255 -1.2 1.1 -2.3
New Orders……… 35,392 34,572 34,396 2.4 0.5 1.2
Computers and electronic products:
Shipments……… 27,471 27,259 27,569 0.8 -1.1 -3.1
New Orders……… 21,661 22,239 21,541 -2.6 3.2 4.6
Computers and related products:
Shipments……… 2,283 2,307 2,336 -1.0 -1.2 -5.9
New Orders………… 2,265 2,313 2,362 -2.1 -2.1 -3.7
Communications equipment:
Shipments…………… 4,049 4,117 3,960 -1.7 4.0 0.6
New Orders………… 4,620 5,233 4,543 -11.7 15.2 11.9
Electrical equipment, appliances, components
Shipments………… 10,300 10,405 10,195 -1.0 2.1 -0.8
New Orders………… 10,519 10,712 10,358 -1.8 3.4 0.1
Transportation equipment:
Shipments………… 69,111 69,308 66,704 -0.3 3.9 -1.0
New Orders………… 87,074 77,212 67,229 12.8 14.8 8.0
Motor vehicles and parts:
Shipments………… 45,161 44,564 45,158 1.3 -1.3 2.3
New Orders……… 45,340 44,758 45,127 1.3 -0.8 2.3
Nondefense aircraft and parts:
Shipments……… 11,840 12,637 9,709 -6.3 30.2 -10.0
New Orders……… 27,267 20,750 12,346 31.4 68.1 18.4
Defense aircraft and parts:
Shipments……… 4,627 4,669 4,618 -0.9 1.1 -9.5
New Orders……… 5,107 4,303 4,106 18.7 4.8 42.8
All other durable goods:
Shipments……… 34,800 34,789 34,404 0.0 1.1 0.8
New Orders……… 34,826 34,787 34,460 0.1 0.9 1.3
Capital goods:
Shipments………… 84,187 85,510 80,950 -1.5 5.6 -3.8
New Orders……… 103,596 95,064 83,807 9.0 13.4 5.4
Nondefense capital goods:
Shipments……… 74,253 75,770 71,394 -2.0 6.1 -3.5
New Orders……… 91,601 86,190 76,374 6.3 12.9 3.5
Excluding aircraft:
Shipments……… 65,822 66,399 65,164 -0.9 1.9 -2.1
New Orders…… 69,526 69,013 67,531 0.7 2.2 1.2
Defense capital goods:
Shipments……… 9,934 9,740 9,556 2.0 1.9 -5.7
New Orders……… 11,995 8,874 7,433 35.2 19.4 29.9

Easily Seen 

Note how orders for aircraft can skew the overall numbers. A closer look at the “New Orders” components will show precisely what I mean.

New Orders

  • Total +4.2%
  • Excluding Transportation +0.0%
  • Primary Metals -0.2%
  • Fabricated Metals +0.1%
  • Machinery +2.4%
  • Computers and Electronic Products -2.6%
  • Computers Related Products -2.1%
  • Communications Equipment -11.7%
  • Electrical Equipment -1.8%
  • Transportation Equipment +12.8%
  • Motor Vehicles and Parts +1.3%
  • Non-Defense Aircraft and Parts +31.4%
  • Defense Aircraft and Parts  +18.7%
  • Other Durable Goods +0.1%

One quick glance at new orders will give you the “easily seen” look at the durable goods numbers. Although such analysis is “easily seen” not many bother. Instead, many rely on the baseline reported number.

But what about the “not-so” easily seen? I am talking about constant revisions and the overall use of the report in general.

Revisions

Alan Hartley of Black Cypress Capital says Beware Revisions.

Today the U.S. Department of Commerce reported new orders for manufactured durable goods. One data point often analyzed by investors within the report is “non-defense capital goods ex aircraft”. This is considered a good proxy for business capital spending in the U.S.

That is all well and good, but we find the data less useful than most.

Why? Heavy revisions.

Take June 2012 for instance.

When non-defense capital goods ex aircraft (non-seasonally-adjusted) was originally reported in 2012, it was $67,693. The following month it was revised to $66,452. It was then revised to $64,906. Today June 2012 was revised yet again to $68,555. Over the course of the year, June 2012 looked as though it had fallen nearly 5% from June 2011, only to be revised today to show an actual gain of 0.5%.

History of Non-Defense Capital Goods Ex-Aircraft Revisions 

Here is the telling chart that  Hartley put together.



Core Durable Goods

Core Durable Goods” are the “total durable goods orders excluding transportation equipment. The new orders numbers are closely followed by market participants as they provide indications on current economic conditions as well as future production commitments in the manufacturing sector.

Today we see Durable Goods Excluding Transportation is +0.0%. If June 2012 is any guide, the number may be off by 5% in either direction.

Of what use is that?

And the reported baseline number of +4.2% is even more useless. Non-defense aircraft orders are up a whopping 31.4% on the strength of 287 new orders for Boeing aircraft.

Such orders are extremely volatile, and cancelable.

The Good, The Bad, The Ugly

  • The Good: The basline number was up 
  • The Bad: The overall core number was flat; Numerous core numbers were negative 
  • The Ugly: Over the course of the next year (or longer), the census bureau is likely to significantly revise all of the numbers in multiple directions, multiple times.

The bad and the ugly clearly outweigh any good in this report. So don’t take today’s surprisingly good number seriously.

Mike “Mish” Shedlock