22 Thursday Dec 2016
Posted | December 22, 2016 11:00:41 | Economics
The Census Department Advance Report on Durable Goods Manufacturers’ Shipments, Inventories, and Orders shows durable goods orders fell 4.6%. Excluding defense, new orders decreased 6.6 percent.
What October Brought, November Took Away
The one bright spot in the report was core capital goods (non-defense capital goods excluding aircraft). Core capital goods new orders rose 0.9%.
Mike “Mish” Shedlock
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“The one bright spot in the report was core capital goods (non-defense capital goods excluding aircraft). Core capital goods new orders rose 0.9%.”
1/3 of “bright spot” = ??
The devil in the revisions. Core capital goods in last month’s report
September (1st revision) … $62.819 billion
October … $63.053 billion
This report
September (2nd revision) …$62.710 billion
October (1st revision) … $62.807 billion
November … $63.360 billion
If you take revisions into account gain only ~ +0.3%
https://www.census.gov/manufacturing/m3/historical_data/pressreleases/adv/2016/oct16adv.pdf
Core capital goods are the key and they are extremely stable for the 3 months. Nothing to see here, move along.
To the good, you compare month to month consecutive. This is comparing apples to oranges. There’s no law that says July must be higher than June to be good.This period year over last period year or this YTD vs last YTD is more telling. To put it another way, Feb has 28 days while Jan has 31. The time variance alone would count for something if a constant rate were assumed.
Thus, the terrible numbers you describe are really out of context and not quite so terrible.
To the bad, Y over Y isn’t great overall, but isn’t quite so terrible and some elements offer ‘hope’ .
“To the bad, Y over Y isn’t great overall, but isn’t quite so terrible and some elements offer ‘hope’ .”
Really?
Care to back up your statement?
In the meantime I’ll train my battleships main guns on your position … ready to unload with FACTS that show you’re wrong.
Look at the report the post links to. You’ll see Y over Y isn’t at bad ad M over M.
Mish has a habit of comparing Month to Month and only sometimes shows Year over Year comparisons. M/M is meaningless in many contexts. Y/Y has more relevance. In this case, Y/Y isn’t great, but isn’t as bad as M/M. Depressing vs dismal is a better context here.
Yeah, but you are not factoring in revisions … which have (significantly) weighted to the downside the past 2 years.
Looking at this report if you compare seasonally not adjusted numbers for November in 2015 and 2016.
November 2015
total orders … $222.905 billion
core capital good orders … $60.448 billion
November 2016
total orders … $221.684 billion
core capital good orders … $59.276 billion
OK, yeah, not so bad … only a little negative year over year (never mind that Q4 2015 GDP only +0.9% …. a very low bar to hurdle).
BUT
November 2015 INITIALLY reported numbers (NSA)
total orders … $227.605 billion
core capital good orders … $64.015 billion
https://www.census.gov/manufacturing/m3/historical_data/pressreleases/adv/2015/nov15adv.pdf
November 2015 numbers were SIGNIFICANTLY revised DOWNWARD … if not for the revisions the year over year much worse.
November 2016 durable numbers will face multiple revisions.
Do you feel lucky?
I’m not surprised at the 29% month-month increase in defense. Budgets are passed in September and funding goes to projects immediately.
Year to date is always best guide. Given what we are seeing with other data and adjusting for the extra day this year plus inflation, total orders and shipments look like being down in the range of 3-4% for the year. I find the most important metric to be that of total business sales which combines manufacturing, wholesale and retail, really half the non-government economy for all intents and purposes. Q3 2014 £1.35 trillion compared to $1.31 trillion Q3 2016 an inflation adjusted fall of 7.5%. If November is anything to go by Q4 will only be marginally better. In my book a fall of that magnitude spells recession. (https://fred.stlouisfed.org/series/TOTBUSSMSA#0)