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Durable Goods New Orders Growth Shrinks to Zero, 0.5 Percent Expected

Economists have missed the mark for 6 straight months on housing, now they missed on durable goods.
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Durable goods from census department

Durable goods from census department

The Advance Monthly Durable Goods Report for July shows order growth collapsed to zero,

New Orders 

  • New orders for manufactured durable goods in July decreased less than $0.1 billion or virtually unchanged to $273.5 billion. This decrease, down following four consecutive monthly increases, followed a 2.2 percent June increase. 
  • Excluding transportation, new orders increased 0.3 percent. 
  • Excluding defense, new orders increased 1.2 percent. 
  • Transportation equipment, down following three consecutive monthly increases, drove the decrease, $0.6 billion or 0.7 percent to $93.0 billion. 

Shipments 

  • Shipments of manufactured durable goods in July, up fourteen of the last fifteen months, increased $1.0 billion or 0.4 percent to $270.5 billion. 
  • This followed a 0.3 percent June increase. 
  • Transportation equipment, up nine of the last ten months, drove the increase, $1.0 billion or 1.1 percent to $86.3 billion.  

The Bloomberg Econoday consensus was 0.5% in a very wide range of -0.4 % to 2.1 %. Durable goods orders are extremely volatile which accounts for the wide range. 

However, with housing plunging, and thus demand for appliances, I do not know why anyone would expect another big jump.  

Durable Goods New Orders in Millions of Dollars

Durable goods from census department, chart by Mish

Durable goods from census department, chart by Mish

The growth in orders looks stunning, but it is not inflation-adjusted. Here is a chart that puts things in a better perspective.

Durable Goods New Orders Percent Change From a Year Ago

Durable goods from census department, chart by Mish

Durable goods from census department, chart by Mish

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Transportation is extremely volatile due to aircraft which also has very long lead times.

Durable goods orders are barely keeping up with inflation. Motor vehicles and parts are not. 

This data is much weaker than it appears. 

A Big Housing Bust is the Key to Understanding This Recession

It's cyclicals (housing and durable goods) that will drive the recession. With that in mind, note that A Big Housing Bust is the Key to Understanding This Recession

Housing drives durable goods, and existing home sales far more than new home sales. Both have been exceptionally week. 

Services, are now signaling recession as well. 

For discussion, please see Recession Evidence Piles Up with S&P PMI Services Leading the Way

This post originated at MishTalk.Com

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