Durable goods orders bounced a much greater than expected 3.4% with autos and aircraft leading the way.
Excluding transportation, the bounce was as expected.
Amidst the strength, core capital goods orders declined 0.8%.
Bloomberg Econoday comments on the durable goods orders.
Highlights
Indications on the factory sector have been mixed as is April’s durable goods report. The headline came in at a stronger-than-expected gain of 3.4 percent with March revised higher to a gain of 1.9 percent. Vehicles orders gave an important boost to April, up 2.9 percent as did the always volatile commercial aircraft component which swung 65 percent higher. But the ex-transportation reading, which excludes vehicles and commercial aircraft, rose a more modest and as-expected 0.4 percent.
A negative in the report is a sizable 0.8 percent decline in core capital goods orders which ominously is the third straight decline for this reading and the fifth out of the last seven reports. Year-on-year, orders are noticeably in the negative column at minus 5.0 percent. These readings point squarely to stubborn weakness in business investment and uncertainty in the general business outlook.
There are, however, solid points of strength in the report including 0.6 percent gains for both total shipments and total unfilled orders. The gain for unfilled orders is the largest since July 2014. Another plus is a 0.2 percent decline in inventories which pulls down the inventory-to-shipments ratio to a leaner 1.65 from 1.67.
Vehicle strength is an important foundation for the factory sector, one tied to domestic consumer demand and a strength that highlights this otherwise mixed report.
Mixed Report
That’s a balanced commentary on a mixed report. There certainly is stubborn weakness in business investment. Companies would rather use cheap financing to buy back shares at insane PE ratios than invest in production.
The word “uncertainty” is overused and ludicrous.
In the Advance Report on durable good, the Census Department does not show an inventory-to-shipments chart.
Here is the chart reflective of the last full report on total business inventories to sales, revised May 13.
Small improvements in the inventory-to-sales ratios are not worth crowing about.
Mike “Mish” Shedlock
I was at the Toyota dealership this morning. Three years ago the lot was full of new cars with a much smaller selection of recent model used cars. Today I go in and they have expanded two more lots just for the used cars. I could not find any new cars and asked where they were. The few they had were scattered in different areas. Low inventory of new cars and tons of used cars. Please don’t say they sold them all since all models had much less selection. What is happening?
Probably new cars leased out for the old car leases expiring this year.
FYI
“Auto Price War Ahead, Lower Prices Coming Soon!”
“Prepare yourself for a price war in the automotive sector….”
“Manheim Auto Auctions expects 2.1 million off-lease cars to hit the market this year, and says that could rise to 3 million or more by 2016.”
“Years of rising auto sales driven by artificially low interest rates have driven sales and leases. While we hear claims that the auto market is hitting on all cylinders we also hear of far too many unemployed students buying new cars. Failure to focus on where the sales are coming from or originating is a mistake and so is not recognizing that the industry is creating its own problems in future years. Recently, we have heard about sales not about soaring profits. Record levels of channel stuffing produces sales gains, but no profits……
http://brucewilds.blogspot.com/2015/11/auto-price-war-ahead-lower-prices.html?m=1
Tuesday, November 17, 2015
“Durable goods orders bounced a much greater than expected 3.4% with autos and aircraft leading the way.”
Not so fast. THE story here is the revisions to prior months. LARGE NEGATIVE REVISIONS.
I’ll limit revisions to first 3 months of 2016.
Total durable orders. First number will be previous total … second today’s revision.
March … $230.651 billion —> $228.281 billion
February … $228.863 billion —> $224.081 billion
January … $236.102 billion —> $231.756 billion
the same for core capital goods orders
March … $66.877 billion —> $62.350 billion
February … $66.880 billion —> $62.866 billion
January … $68.706 billion —> 64.277 billion
For core capital goods the Year to Date (over 2015) change went from -1.1% in march to -4.1% in April.
Will Q1 GDP be negative? Lowering Q1 will make Q2 better (GDP is quarter over quarter) … all things equal.
Negative revisions of -3% add to the current report, later revised down.
tony B:
do you by chance have a link for the revisions? TIA
a link to an authoritative source like Dept of Commerce-I cannot find anything.
March report
http://www.census.gov/manufacturing/m3/historical_data/pressreleases/adv/2016/mar16adv.pdf
April report
http://www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf
thanks, also John Williams Shadow Stats referred to the revisions today. just one more (or two) pieces of data to question the interest rate decision,
For durable orders … the core capital goods orders best read on true state of economy … does this chart look like a healthy economy?
https://research.stlouisfed.org/fred2/series/NEWORDER