Durable goods orders jumped 4.4% in July, but June was revised lower to -4.2%. May was down 2.9%.
Excluding transportation, durable goods orders were up 1.5%, following June at -3.3% and May at 0.5%.
According to Bloomberg Econoday, this “definitely shows signs of life“.
Highlights
The factory sector, after a frustrating first half of the year, is now definitely showing life. Durable goods orders jumped 4.4 percent in July in a headline gain exaggerated by a swing higher for commercial aircraft but including gains across most readings. Excluding the gain for aircraft and no change for autos, orders rose a very sizable 1.5 percent. And the strength includes core capital goods where orders jumped 1.6 percent to show new demand for business equipment and machinery.
Though the gain for new orders points to future strength for shipments, shipment data for July are soft. Total shipments rose only 0.2 percent in the month with core capital goods shipments, which are an input into the nonresidential investment component of the GDP report, down 0.4 percent to get the third-quarter off to a slow start. And immediate negatives for tomorrow’s second estimate of second-quarter GDP are incremental downward revisions to core capital goods shipments in June and May, now at minus 0.5 and minus 0.7 percent.
Unfilled orders are also a concern in the report, down 0.1 percent in July on top of June’s very steep 0.9 percent decline. Lack of unfilled orders is not only a negative for production but also for employment. On the plus side, inventories broke a long run of contraction with a 0.3 percent rise and are still very lean with the inventory-to-shipments ratio unchanged at 1.64.
Turning back to new orders, other areas of monthly strength include both primary and fabricated metals, electrical equipment, and defense aircraft. A general trend reading underscoring the report’s strength is the year-on-year new order rate for ex-transportation, now at only minus 0.6 percent vs minus 3.4 percent in June.
New orders in this report together with last week’s strong showing for manufacturing in the industrial production report point to second-half possibilities for the factory sector and its contribution to the nation’s growth.
Manufacturing Life?
This writer would find signs of life on the moon if given the chance.
Every uptick in any report purportedly shows “signs of life”. Moreover, the bounce back was actually widely expected. The consensus estimate was for a reading of 3.7%. But June was revised lower by 0.2 percentage points and last month May was revised 0.6 percentage points lower to 2.8% from 2.6% and today it sits at -2.9%.
Every bounce could be one that lasts. Will this be the one?
The big jump was in transportation orders, up 10.5%. But last month transportation was down 11.4%. In May, transportation was down 7.1%. It’s important to note that transportation orders have suffered significant cancellation requests recently.
So, are there a sign of life or is this just another round of order rebalancing skewed from one month to another?
Mike “Mish” Shedlock
Stripping away the lipstick …
Last month’s report (June) … Calendar Year to Date over 2015
Total shipments … -0.4%
Total new orders … 0.0%
Core shipments … -4.5%
Core new orders … -3.8%
This report (July) … Calendar Year to Date over 2015
Total shipments … -1.1%
Total new orders … -0.9%
Core shipments … -5.2%
Core new orders … -4.3%
And, of course, current numbers subject to multiple revisions. July 2015 NSA total new orders initially reported at $225.648 billion. Now $222.304 billion.
Look at last year… big August spike followed by Sept heavy down.
Perhaps some DATA ( in a gov back stopped system)is now irrelevant. Example –being Japan Gov.buying ETFs and bonds then what meaning does this information represent?
WASHINGTON, D.C. – August 24, 2016 – The Association of American Railroads (AAR) today reported U.S. rail traffic for the week ending August 20, 2016.
For this week, total U.S. weekly rail traffic was 531,484 carloads and intermodal units, down 6.4 percent compared with the same week last year.
Total carloads for the week ending August 20 were 270,464 carloads, down 6.4 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 261,020 containers and trailers, down 6.4 percent compared to 2015.
…
For the first 33 weeks of 2016, U.S. railroads reported cumulative volume of 8,126,642 carloads, down 11.4 percent from the same point last year; and 8,506,957 intermodal units, down 3 percent from last year. Total combined U.S. traffic for the first 33 weeks of 2016 was 16,633,599 carloads and intermodal units, a decrease of 7.3 percent compared to last year.
https://www.aar.org/newsandevents/Press-Releases/Pages/2016-08-24-railtraffic.aspx
Another sign of “improving” economy …
RICHMOND — Gov. Terry McAuliffe (D) will announce a larger-than-expected shortfall in the Virginia state budget Friday, possibly in the range of $1.5 billion, according to several people familiar with the figures.
Two people with knowledge of the budget situation said the governor was expected to announce a projected shortfall of about $1.5 billion in its current two-year, $105 billion budget.
https://www.washingtonpost.com/local/virginia-politics/virginia-could-be-facing-much-bigger-budget-shortfall-than-expected/2016/08/24/6d8c7c6e-6a37-11e6-8225-fbb8a6fc65bc_story.html
Railroad volume has been in decline for a long time. Trucking volume is 7 times larger.
Check at ground level. Trailets 1/2 empty on 1 way rides. Maybe trains cant fill up enough cars to make an adequate profit?
http://www.cassinfo.com/~/media/images/transportation-1024/indexes/freight%20index/2016/cass%20freight%20index%20-%20shipments%20-%20july%202016.ashx?la=en
Robots considered durable goods, right?
We are going to be stuck with low growth if any for a long time. So any positive stat will be duly noted. I am waiting until the election is over to see what will really happen. The plunge protection team is hard at it trying to keep this boat afloat. The same would happen no matter the party sitting in the White House. I used to watch the new but turn it off now as all it is about is murder, politics, and joy, joy, JOY on the economy!!!
Now that the Clinton team is claiming Trump will cause a world wide recession if elected, LOL You just cannot make this stuff up anymore. The root of the problem started when the Dems passed the Obamacare and took over 22% of the economy and we pleabs just do not have the disposable income we once had. Can you imagine what the economy would be like right now with 100 a barrel oil?
I come and read this site daily. I avoid reading my usual sites. Most sites these days as usual have all the paid political pundits for both sides screaming we are all going to die or worse if we vote for him or her. Really depressing, this election cycle is!!