Factory orders did way better than the Econoday consensus estimate of -1.9% but that was against a revision that took July from +4.4% to +3.6%. The good news pretty much stops there.
The headline, at a monthly zero percent, is flat and so are the indications from the bulk of the August durable goods report. Excluding transportation, orders slipped 0.4 percent. This reading excludes a 22 percent downswing in civilian aircraft orders that is offset in part, however, by a solid 0.7 percent gain for vehicle orders. Readings on core capital goods (nondefense excluding aircraft) are mixed with orders up 0.6 percent, which points to shipment strength ahead, but current shipments are down -0.4 to extend a long string of declines going back to May. The weakness here in shipments is a negative for business investment in the GDP report.
Aside from vehicles and a strong gain for defense capital goods, good news is hard to find in today’s report. Total shipments are down 0.4 percent following no change in July while unfilled orders, which last posted a gain in April, fell 0.1 percent. Inventories did fall, down 0.1 percent, but not enough to keep the inventory-to-shipments ratio from rising to a less lean 1.66 from July’s 1.65.
Another negative in the report is a downward revision to July where the gain in total orders is shaved 8 tenths to 3.6 percent. But July was still a very strong month and the August results, though flat, are better than expected. Still, the data point to more of the same for the factory sector, a flat trajectory reflecting weakness in global demand and specific weakness in business investment.
Except for continual nonsense about lean inventories, that was a nicely balanced report by Econoday for a change.
Durable Goods Percent Change from Year Ago
Durable Goods Excluding Transportation
Durable Goods Excluding Transportation Percent Change from Year Ago
Autos have kept durable goods from collapsing. But the last two auto sales reports were much weaker than expected. The charts look weak and will likely get a lot weaker.
Mike “Mish” Shedlock