Those looking for “lift off” material for Fed hikes will not find it in the latest Durable Goods report from the US Department of Commerce.
Durable Goods orders declined 2.0% in line with Bloomberg Consensus Estimates, but details and year-over-year numbers weak.
Transportation equipment, specifically aircraft orders, are once again skewing durable goods orders which fell 2.0 percent in August as expected. Excluding transportation, durable goods were unchanged which is slightly lower than expected. Weakness here in part reflects a pause for core capital goods as nondefense ex-auto orders slipped 0.2 percent following two prior months of very solid growth.
Looking at transportation equipment, both aircraft and motor vehicles were weak. Orders for civilian aircraft fell 12 percent in the month while vehicle orders fell 1.5 percent. Vehicle shipments were down 1.6 percent but follow July’s big 4.7 percent surge.
Total shipments were flat in the month but follow solid gains in July and June. Core capital goods shipments, like orders, slipped 0.2 percent but also follow prior gains. Still, the dip in core shipments will not be lifting third-quarter GDP estimates. Factories held inventories unchanged in August and worked off backlog orders slightly, down 0.2 percent.
Shipments and Orders Current vs. Prior
The transportation decline was expected. The decline ex-transportation was not expected.
Also note the revision to last month’s ex-transportation number. These numbers certainly will not add to third quarter GDP estimates.
Durable Goods New Orders
Durable Goods New Orders vs. Year Ago
Note the over-sized effect that transportation has on order. Yet the picture is not pretty even when transportation is excluded.
Durable Goods New Orders vs. Year Ago Detail
Recession on the Way?
The effect of QE, and central bank stimulus in general, is over (assuming it was ever really in play in the first place).
If the strength in autos is over, and I suppose a global scandal on Volkswagen would mark a fitting top, then recession cannot be too far off.
Mike “Mish” Shedlock