Durable Goods orders

US durable goods 26 03 2014

The Advance Report on Manufacturers’ Shipments, Inventories and Orders released today gives us a first look at the November durable goods numbers. Here is the Bureau's summary on new orders:

New orders for manufactured durable goods in November increased $0.1 billion or virtually unchanged to $238.8 billion, the U.S. Census Bureau announced today. This increase, up two consecutive months, followed a 2.9 percent October increase. Excluding transportation, new orders decreased 0.1 percent. Excluding defense, new orders decreased 1.5 percent.

The latest new orders headline number at 0.03 percent beat the Investing.com estimate of -0.6 percent. This series is up 1.2 percent year-over-year (YoY). If we exclude transportation, "core" durable goods came in at -0.1 percent month-over-month (MoM), which was below the Investing.com estimate of 0.1% percent. The core measure is down to -1.9 percent YoY.

If we exclude both transportation and defense for an even more fundamental "core", the latest number was down at -2.7 percent MoM and is down at -5.5 percent YoY.

Core Capital Goods New Orders (nondefense capital goods used in the production of goods or services, excluding aircraft) is an important gauge of business spending, often referred to as Core Capex. It posted a -0.4 percent decline and is down 1.8 percent YoY.

For a look at the big picture and an understanding of the relative size of the major components, here is an area chart of Durable Goods New Orders minus Transportation and Defense with those two components stacked on top. We've also included a dotted line to show the relative size of Core Capex.

The next chart shows year-over-year percent change in Durable Goods. We've highlighted the value at recession starts and the latest value for this metric.

The next chart shows year-over-year percent change in Core Durable Goods (i.e., excluding transportation).

The next chart shows the growth in Core Durable Goods overlaid on the headline number since the turn of the century. This overlay helps us see substantial volatility of the transportation component.

Here is a similar overlay, this time excluding Defense as well as Transportation (an even more "core" number).

Core Capital Goods

The next two charts take a step back in the durable goods process to show Manufacturers' New Orders for Nondefense Capital Goods Excluding Aircraft, a series often referred to as Core Capex. Here is the year-over-year Core Capex.

The next chart is an overlay of Core Capital Goods on the larger series showing the percent change of the two since the turn of the century.

In theory the durable goods orders series should be one of the more important indicators of the economy's health. However, its volatility and susceptibility to major revisions suggest caution in taking the data for any particular month too seriously.

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Q&A

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What does a negative durable goods order mean? | Yahoo Answers

They are talking about the level of durable goods orders being down from the previous quarter. I other words, if in the previous quarter durable goods orders totaled $100, and this quarter durable goods orders totaled $90, you'd say orders are down 10%, or say the durable goods number was -10%. (You would not say "down -0.8%", that's a double negative. That is not what you heard or read.)
And of course a POSITIVE number would represent an INCREASE in durable goods orders.
A decline in durable goods is certainly not perceived as good by anyone. The market was up today for other reason…


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