The Census Bureau reports durable goods orders in January rose 1.8% but the good news stops there. December was revised from -0.4% to-0.8%, core capital orders fell 0.4%.
Bloomberg Econoday gets the spin correct in its Durable Goods Synopsis.
Highlights
Throw out the all the advance indications that show unusual acceleration in the factory sector, because the meat of the January durable goods report only shows the usual volatility behind which are sagging numbers for key readings. Aircraft, both domestic and defense, skewed durable goods orders sharply higher in January, up 1.8 percent to hit the Econoday consensus. Not hitting the Econoday consensus, however, are orders that exclude aircraft as well as all other transportation equipment. This reading fell 0.2 percent to come in well below Econoday’s low estimate for a 0.2 percent gain.
The worst news in the report is a 0.4 percent decline in orders for core capital goods (nondefense ex-aircraft). This ends 3 months of strength for this reading and pulls the rug out from expectations for a first-quarter business investment boom as indicated by business confidence readings.
Pulling the rug out from the whole factory outlook is yet another contraction for unfilled orders, down 0.4 percent and which have now fallen in 7 of the last 8 months. This is the deepest contraction since the recession and points squarely at a lack of hiring for the factory sector. In other data, shipments are down 0.1 percent and inventories are unchanged to keep the inventory-to-shipments ratio unchanged at 1.61.
But aircraft is a big positive in this report though monthly gains are not likely to extend far, if at all. Upward revisions to December are a plus for fourth-quarter revisions while another positive is a 0.2 percent January gain for motor vehicles where the outlook however, given the strength of prior sales gains, is uncertain and will pivot on Wednesday’s release of February unit retail sales. Weak exports have been the Achilles heel of the factory sector and today’s report points to a continued lack of demand for U.S. factory goods. Watch for advance data on goods exports in tomorrow’s trade report for January.
Durable Goods Orders and Shipments
Diving into the details provides a much better look at what’s really happening than the headline number that was skewed by aircraft orders.
Mike “Mish” Shedlock
Thank God for big goobermint starting wars and buying armaments or the whole thing would be in shambles. What percentage of GDP is manufacturing? Is it big enough to make a difference any more?
Add in the fall in pending home sales and this adds up to a softening economy. We are now entering the testing zone, can an economy whose anaemic growth depends on low interest rates, weather a rise in interest rates. If a mere 0.6% increase in the ten year yield and 30 year mortgage rates has this effect, imagine what will happen when Trumponomics with its higher deficits kicks in and with it a further increase in rates.
I haven’t seen an accurate media critique of an economic report in a very long time. What is different now?
An intern snuck one by the editor.
A good war will straighten this economy out. Put a lot of people to work as they emigrate out of the country to kill other people. High turnover rate too. The bigger the war, the more we will prosper. Not China, they make stuff for us. Iran would be perfect. When do we start.
Once again Mish I’ve recommended you to our president as the best economic blogger available for trustworthy due dillegence investigation of government reporting.