Hard data for the second quarter continues to suffer despite diffusion indexes that have generally performed better. Put more credence on the hard data.

Factory orders in April declined -.2% in line with the Econoday consensus.

The Census Department revised March up from 0.2% to 1.0%, but that is mostly a mirage of aircraft orders that will impact production years from now. Also, February new orders were revised lower, taking away half of March’s gain.

The weak run of second-quarter data continues with April’s 0.2 percent decline in factory orders. The durable goods component fell 0.8 percent in the month reflecting a give back in aircraft orders and wide weakness for most readings. Orders for non-durable goods rose 0.4 percent reflecting moderate gains for food and energy.

The ex-transportation reading, which excludes aircraft, managed only a 0.1 percent gain in the month with core capital goods orders (nondefense ex-aircraft) also up only 0.1 percent. April’s shipments of core capital goods, which are an input into second-quarter GDP, also rose only 0.1 percent which is another negative in this report. And only a marginal positive for GDP is a 0.1 percent rise in total inventories. Total shipments were unchanged in the month keeping the inventory-to-shipments ratio unchanged at 1.38.

Positives in the report include a 0.6 percent rise for motor vehicle orders and a 1.6 percent rise for computers. Also total unfilled orders, which contracted through most of last year, are up 0.2 percent for a second straight small gain.

Another positive in the report is an upward revision to March factory orders which now stand at 1.0 percent following February’s 0.8 percent gain. But the prior gains were driven by aircraft as the ex-transportation reading could move only modestly higher. The factory sector is not living up to the promise of the high-flying regional reports and, instead of accelerating this year, now appears to be struggling.

Factory Sector Struggles

The factory sector is not just now struggling. Rather, Econoday is just now noticing. Other than one report on industrial production, nearly everything has struggled.

Factory Orders and Shipments


Ther numbers in blue reflect as-reported numbers last month. Although March new orders were up 0.8 percentage points from the as-reported numbers last month, revisions took January-February down 0.4 percentage points. Shipments revisions were flat.

April Data

Shipments, which feed into GDP are +0.0, -0.2, and +0.3 in the last three months. That’s not exactly humming.

New orders are more respectable at -0.2, +1.0, and +0.8. However, that is heavily influenced by aircraft.

Excluding transportation (line not shown), new orders are +0.1, +0.2, +0.3.

Core capital goods (nondefense capital goods excluding aircraft), a measure of manufacturers’ willingness to expand, are +0.1, +0.1, and +0.1 in the last three months.

Yes, this is a struggle, and it’s not just starting.

The “high-flying” regional reports have proven to be nonsense.

Second Quarter Reality

  1. Payrolls “Unexpectedly” Weak, Negative Revisions, Earning Poor: What Happened?
  2. Trade Deficit Widens: Cascade of Bad News Accelerates, Trump Will Howl
  3. Construction Spedding: Construction Spending Falls Sharply, March Revised Higher: Construction Spending Mysteries
  4. Motor Vehicle Sales: Motor Vehicle Sales Flat, Hope Turns to Second Half: What About Fleet Sales? Incentives?
  5. April Durable Goods shipments down 0.3%, new orders down 0.7%: April Durable Goods: Yet Another Weak Second-Quarter Report 
  6. Wholesale Inventories: Down 0.3% in April. March revised lower from 0.2% to 0.1%.Retail Inventories: Down 0.3% in April. March revised lower from 0.5% to 0.3%. For details, please see Fed Eyes Second Quarter Recovery, Expects Trump Fiscal Policy Will Expand Economy
  7. Trade deficit in April widens by 3.8% with exports down and imports up: Trade Deficit Widens, Exports Weak: Economists Miss the Mark
  8. Tax Receipts: Federal Tax Receipts Running Below Expectations
  9. April New Home Sales: New Home Sales Contract 11.4%: Sales Barely Up Year-Over-Year
  10. April Existing Home Sales: New Home Sales Contract 11.4%: Sales Barely Up Year-Over-Year
  11. April Existing Home Sales: Spring Housing Flop: Existing Home Sales Decline 2.3 Percent, Inventory Issues Persist
  12. April Housing Starts: About that Strong April Recovery: Housing Starts and Permits Flop, March Revised Lower
  13. April Empire State Manufacturing Survey: Empire State Manufacturing Survey Turns Negative: Welcome News?
  14. April Retail Sales: Sales were at least positive (+0.4%), but they were well under economists projections: Retail Sales Disappoint Again: Department Stores Clobbered in 2017

Mike “Mish” Shedlock