Wednesday, March 24, 2010

Durable Goods Orders Increase for Third Month


WASHINGTON (MarketWatch) - "Demand for U.S.-made durable goods rose a seasonally adjusted 0.5% to $178.1 billion in February, the third straight increase in a key forward-looking indicator, according to Commerce Department data released today. New orders for machinery and civilian aircraft were strong in February, while new orders for autos, defense goods and electronics declined. The 0.5% increase in durable goods orders was weaker than the 1.7% gain expected by economists surveyed by MarketWatch. However, January's orders were revised higher, from a 2.6% gain to 3.9%. December's orders were also revised higher."

MP: New orders for durable manufactured goods in February reached the highest level ($178.1 billion) since November 2008 (see top chart above). The 12-month percentage change in February of 10.9% followed an 11.9% increase in January, which was the highest annual increase in new orders for durable goods and equipment from U.S. manufacturers since September 2006, more than three years ago (see bottom chart). The last time there were two consecutive double-digit monthly increases in durable goods orders was four years ago in the spring of 2006.

Add this to the growing list of V-shaped signs of economic recovery, especially in the U.S. manufacturing sector.

16 Comments:

At 3/24/2010 8:16 AM, Anonymous Junkyard_hawg1985 said...

Mark,

Is your chart in inflation adjusted dollars? Looking at the data, it shows that durable goods orders have fallen ~5% since 2000. If the data is not inflation adjusted, it would be much worse than that for real durable goods manufacturing.

 
At 3/24/2010 8:52 AM, Blogger PeakTrader said...

Hawg, it's misleading to compare a sharp one month spike in 2000 (or use that as a base) to the most recent month.

 
At 3/24/2010 9:00 AM, Anonymous morganovich said...

that's a really weak durables number for a "v" recovery, especially after the kind of decline we had. it also fell short of the consensus estimates of .7%.

this still looks more like a "u" at best, especially with housing rolling over again.

 
At 3/24/2010 9:06 AM, Anonymous morganovich said...

peak-

then how about this:

durables orders are still down 18% from pre-crisis levels and are similar to where they were in 2001 as the dot bust was still gathering steam.

the %'s chart is incredibly easy to misinterpret. a stock that goes from 100 to 10 may well be up 100% when it goes to 20, but that's hardly a recovery if you were planning to retire on it.

look at actual orders. they are not recovering well relative to the decline.

 
At 3/24/2010 9:21 AM, Blogger PeakTrader said...

Morganovich, right, 60% of a V isn't a V. However, the recovery may be more of an L than a V, given the current account deficit is 3% instead of 6%.

The last time there was a severe recession, in 1981-82, there were five consecutive quarters of real GDP growth averaging 8.5%, in 1982-83.

Moreover, of course, the job situation is a disaster.

 
At 3/24/2010 10:05 AM, Anonymous morganovich said...

p-

i'm not sure what you mean by "60% of a v".

was that figure based on something or was it intended as an expression?

in assessing "l" vs "v" i've been looking at it like this:

when we began the recovery of 2003, DG orders regained roughly half of their losses in the first year out of the trough. (and the 2003-4 recovery was a pretty tepid one by historical standards).

in 2009-10, the first year has been only about 1/3 of the decline. so, 2/3 of a tepid recovery seems like a a pretty feeble one to me.

jobs are trickier as they tend to lag in a recovery and nearly all recoveries are initially fretted about as "jobless", but you may be right that we should be seeing more by now.

 
At 3/24/2010 10:11 AM, Blogger PeakTrader said...

With the expensive health care reform, the Bush tax cuts expiring in 2011, and more micromanagement in the economy, which the government doesn't understand, the slow recovery should continue.

U.S. households will continue to pay-down debt the hard way, with little or no real help from the government and if they have jobs, to slowly increase growth.

 
At 3/24/2010 10:19 AM, Anonymous Junkyarg_hawg1985 said...

Peak,

I wasn't comparing the current data to the peak month; I was comparing the bulk of 2000 to current. The bulk of the data data from 2000 showed around $190B in monthly durable goods orders. Current month is around $178B.

Do you know if the durable goods data is iinflation adjusted?

 
At 3/24/2010 10:29 AM, Blogger PeakTrader said...

Morganovich, 60% of a V is likely not exact.

Hawg, if 2000 was a peak year, then you're comparing a peak year to today. Dr. Perry should know if it's in constant or current dollars.

 
At 3/24/2010 10:38 AM, Blogger PeakTrader said...

I could be wrong, but it looks like current dollars or not inflation adjusted.

 
At 3/24/2010 11:48 AM, Anonymous Anonymous said...

It's obviously due to the pro-growth policies of the current administration. The author forgets to give credit where credit is due!

 
At 3/24/2010 12:29 PM, Blogger James Fraasch said...

Year over year comparisons are rather meaningless. They are percent changes from a very reduced level.

Reducing orders from 100 to 25 is a 75% decrease. In this case there was multiple large decreases for what looks like 5-6 quarters. So the 20% increases we see now are after a 20% decrease followed by more 20% increases.

The real money is just that, money. What $ level are durable goods orders now vs last year, vs 2007 (pre-crisis).

Glad to see that the decline in orders has stopped. But it is real easy to get a 20% increase from 10 orders (2 orders) vs a 20% increase on the old level of say 100 orders (20 additional orders).

James

 
At 3/24/2010 1:00 PM, Anonymous Benny The Man said...

I don't care.
I say die recesssion, die, die, die.

 
At 3/24/2010 4:20 PM, Blogger OA said...

That big parasite on the economy just keeps getting bigger. While growth is still going to happen, people are unfortunately going to be trumpeting the growth versus asking why it's not bigger.

Someone on CNBC World was talking about a LUV recovery. Some countries were in an L, some in a U, and some in a V. Can't recall which groupings he was thinking, but on a relative basis, it's hard to believe the US is going to be a V.

 
At 3/24/2010 5:57 PM, Blogger Craig said...

With the expensive health care reform, the Bush tax cuts expiring in 2011, and more micromanagement in the economy, which the government doesn't understand, the slow recovery should continue.

Yes. As layoffs decline, employed consumers might be expected to gradually buy more consumer goods. But that will eventually hit a wall.

Until business begins to spend on capital goods, though, there can be no real growth. Given the uncertainty in the health care bill alone, business will likely keep its head down.

Economic growth is capital growth. We're spending our capital on government consumption instead of investing it in productive ventures.

 
At 3/24/2010 8:01 PM, Blogger juandos said...

Let's not worry about those pesky increases in durable goods, this administration will take steps to see that it comes to a screeching halt!...

Just ask the man in charge...

 

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