Durable Goods Orders Downside Surprise; Details Range from Weak to Abysmal

from Mish's Global Economic Trend Analysis by noreply@blogger.com Michael Shedlock

Spending on durable goods rose slightly in July but only on the back of an unsustainable spike in aircraft orders. The rest of the data ranged from weak to abysmal.

As has been the case recently, economists missed the mark by a mile. Economists expected a 3% rise, what they got was a .3% rise.

The Washington Post discusses the situation in Durable goods orders disappoint in latest sign of economic weakness

Overall, orders for durable goods rose 0.3 percent, the Commerce Department said Wednesday, well below the 3 percent that analysts had expected. But even that slight rise was driven by a spike in aircraft orders, a volatile category. Excluding transportation, durable goods orders fell 3.8 percent.

Most worrisome, orders for non-defense capital goods excluding aircraft fell 8 percent. That indicator tends to predict future equipment spending by businesses, Business spending on equipment and software rose at more than a 20 percent annual rate in the first half of 2010, one of the bright spots in the economic picture; the new data suggest that such spending may not be as strong in the second half of the year.

Detail Digging

Inquiring minds are digging a bit deeper into the Advance Report on Durable Goods Manufacturers' Shipments, Inventories and Orders July 2010.

New Orders

New orders for manufactured durable goods in July increased $0.6 billion or 0.3 percent to $193.0 billion, the U.S. Census Bureau announced today. This increase followed two consecutive monthly decreases including a 0.1 percent June decrease. Excluding transportation, new orders decreased 3.8 percent. Excluding defense, new orders increased 0.3 percent.

Transportation equipment, also up following two consecutive monthly decreases, had the largest increase, $6.1 billion or 13.1 percent to $52.6 billion. This was due to nondefense aircraft and parts, which increased $4.0 billion.

Unfilled Orders

Unfilled orders for manufactured durable goods in July, down following three consecutive monthly increases, decreased $1.1 billion or 0.1 percent to $802.8 billion. This followed a 0.1 percent June increase. Computers and electronic products, down following four consecutive monthly increases, had the largest decrease, $0.5 billion or 0.4 percent to $121.1 billion.

Inventories

Inventories of manufactured durable goods in July, up seven consecutive months, increased $1.8 billion or 0.6 percent to $311.2 billion. This followed a 1.3 percent June increase. Machinery, up five consecutive months, had the largest increase, $0.9 billion or 1.9 percent to $51.4 billion.

Capital Goods

Nondefense new orders for capital goods in July decreased $1.8 billion or 2.8 percent to $64.1 billion. Shipments increased $0.9 billion or 1.4 percent to $64.7 billion. Unfilled orders decreased $0.6 billion or 0.1 percent to $487.2 billion. Inventories increased $1.0 billion or 0.8 percent to $129.8 billion. Defense new orders for capital goods in July decreased $0.2 billion or 2.2 percent to $9.5 billion. Shipments decreased $0.2 billion or 2.4 percent to $9.5 billion. Unfilled orders decreased slightly to $139.7 billion. Inventories increased slightly or 0.1 percent to $17.9 billion.

Inventories Up Orders Down

Note how inventories have risen seven consecutive months, while new orders, especially capital goods and non-transportation orders have tanked.