In the durable goods May forecast, the Bloomberg Consensus Economist’s Estimate was well off the mark.
The consensus estimate was -0.6% with the actual number a dismal -1.8%, but heavily skewed by a drop in aircraft orders.
The economists had the negative sign correct, but given the huge downward revision from -0.5% to -1.5% for April, they really missed the mark by a mile.
Big downward revisions to April data almost sink the latest durable goods report where, however, important details show some life. Total orders sank 1.8 percent in May but this is badly skewed by a 49 percent drop in aircraft orders where outsized month-to-month swings are the norm. The April revision is the big surprise here, now at minus 1.5 from an initial minus 0.5 percent in an unwelcome reminder of how volatile this series is.
Stripping out transportation, which is where aircraft is tracked, shows strength in the month at plus 0.5 percent which hits the Econoday consensus. But here again, the April revision swings in and takes an initial 0.5 percent gain to minus 0.3 percent.
The key area, however, that remains on the positive side is capital goods where new orders excluding aircraft rose 0.4 percent in May vs a 0.3 percent slip in April which was initially posted at plus 1.0 percent. Shipments for this reading, in what is a plus for second-quarter GDP, show back-to-back gains of 0.3 percent.
Mike “Mish” Shedlock