According to data released today from the Department of Commerce, orders for non-defense capital-equipment goods excluding aircraft rose 1.5% in March after a 4.3% gain in February. Such core capital-goods orders are considered the best gauge of capital spending by businesses, and are also considered a leading economic indicator. The two-month increase of 5.8% in new orders for capital goods was the strongest two-month gain in more than four years, since the 6.5% two-month increase for December 2004 and January 2005.
Thanks to Larry Kudlow for the alert on this.
Another perspective from Haver Analytics....
ReplyDeleteThere seems to be no letup in the factory sector's distress. That's the indication from a 0.8% slip in new orders for durable goods last month. While the magnitude of the slip was a positive surprise versus Consensus expectations for a 1.5% decline, February's gain was lessened to 2.1% from 3.7% reported initially. The best that can be said about the latest figures is that the downward momentum in orders has slackened to a -24.2% annual rate during the last three months versus the 50% rate of decline as of January.
· Lower orders for transportation equipment again led the decline in overall bookings with a 1.4% decline. Orders for motor vehicles fell hard and they are down by more than one-third during the last year. Orders for computers also fell a sharp 2.0% (-21.3% y/y) and primary metals bookings dropped 3.2% (-43.2% y/y). There were glimmers of light elsewhere in the report, but they were just faint ones. Electrical equipment orders made up their February decline with a 1.8% (-9.7% y/y) increase and machinery orders slipped just 0.1% (-26.3% y/y). Their strong February increase, however, was halved to 7.1%.
· Perhaps another glimmer was the 1.9% increase in orders for nondefense capital goods. That followed a 4.9% jump during February. Orders excluding aircraft also recovered 1.5%. During the last ten years there has been an 80% correlation between the y/y change in nondefense capital goods orders and the change in equipment & software spending in the GDP accounts. The correlation of the GDP figure with capital goods shipments is, as one would expect, a larger 92%.
Shipments of durable goods continued to the downside at a steady rate. They fell 1.7% last month and they are off at a 27.9% annual rate during the last three. That weakness has been accompanied by a 30.0% three-month rate of decline in industrial production of durable goods. During the last ten years there has been an 80% correlation between the change in shipments of durable goods and the change in durables industrial production.
· Inventory accumulation continues to respond to these production cuts. Inventories of manufactured durables fell 1.1% during March, about the same as they did during the prior two months. That brought the annual rate of decumulation to 13.1% during the last three months. That nearly matches the rate of decline during the 2001 recession but there's no end in sight if shipments don't show a sign of stabilization.
· The durable goods figures are available in Haver's USECON database.
http://www.haver.com/
What will Kudlow say about durable goods orders after a complete shutdown of production by GM for the balance of the second quarter.
Vehicle production will be down 45%compared to last year, even factoring in Ford’s news that it would up production by 25%. The GM shutdown will ripple across the parts industry as well.
Yes, I know, Kudlow will say its a MUSTARD SEED.