Wednesday, May 26, 2010

Orders for Durable Goods Reach 19-Mo. High

New orders for durable manufactured goods in April reached the highest level ($193.9 billion) since September 2008 (see top chart above). The 12-month percentage increase in April of 19% followed double-digit increases in January (15%), February (14%) and March (17%), and was the highest yearly growth rate in almost ten years, since June 2000 (20%), see bottom chart.  The five consecutive monthly increases starting in December marks the first time October 2007-February 2008 of five straight monthly positive increases in the annual growth rate of new orders for durable manufactured goods. 

Add this to the growing list of V-shaped signs of an economic recovery gaining momentum, especially in the U.S. manufacturing sector, which added 44,000 new jobs in April - the largest single monthly gain in factory jobs since August 1998. 

18 Comments:

At 5/26/2010 8:52 AM, Anonymous morganovich said...

inflation adjust this and i think you'll find that we are still at levels pretty much right on the lows from the last recession contraction in 2001-2.

since 2001, inflation has averaged a bit over 2%.

8 years at 2% = 17.1% increase in price level.

193bn/1.17 = 164bn, barely above the 2001-2 lows from last recession in real terms.

put in context, that's not such an exciting number.

it will be very interesting to see what the recent dollar strength does to these numbers.

 
At 5/26/2010 9:54 AM, Anonymous Anonymous said...

New orders for core capital goods (nondefense capital goods excluding aircraft) were down 2.4% month over month.

Such orders are at late 2005 levels, excluding any price effects.

 
At 5/26/2010 10:20 AM, Anonymous Catonese said...

V?

V?

What alphabet are you using?

The chart YOU post shows no V. It's not quite an L but it's certainly not a V. You've got a precipitous drop of about 36% in one year followed a lazy recovery of 22% the following year which is by no means proven sustainable. Congratulations - we're now back to 2004 levels of manufacturing!

If you're calling a "V" based on the first derivative chart, you don't know what you're talking about. A V-shaped first derivative produces a level function more U-shaped.

That is not a V. It's more like a check mark.

Now you know your ABCs, next time won't you sing with me.

 
At 5/26/2010 10:20 AM, Anonymous morganovich said...

anon 9.54-

that's a really interesting chart.

to my mind, a question it raises is this:

why was the 2007-8 peak so much lower than the 2000 peak once you adjust for inflation?

looks like it was below 1998 levels (i'm approximating though)

given population growth, seems a significant decline.

is there any reason this data might not be comparable?

 
At 5/26/2010 11:05 AM, Anonymous gettingrational said...

I have to admit to not understanding the nuances of a lot of charts posted. I avidly read the comments that are posted about chart data that might challenge the charts. With that mind the preponderance of the charts adds up to V for this period in the history of the U.S. economy. The letter V describes our last years wild ride.

 
At 5/26/2010 11:06 AM, Anonymous Anonymous said...

The St. Louis Fred chart is nominal not real. Core capital goods shipments (you need an order before you ship) are a proxy for business investment in the GDP accounts.

The short answer is that gross private domestic investment (GDPI) in equipment and software was very muted in the 2001 expansion compared to the 1991 expansion.

GDPI (GDP accounts, line 11) started at 6.9% of GDP in 1991 peaking at 9.6% in 2000 and declined almost continuously to 6.4% in 2009.

 
At 5/26/2010 11:34 AM, Anonymous Catonese said...

@gettingrational.

A V is a V. When you draw a V, notice the two tippy tops of the V are at exactly the same level. You also note an acute angle at the bottom.

If you do not return to the pre-recession LEVELS in the same period of time, it is not a V - period.

The old mantra that "deep recessions are followed by rapid recoveries" DOES NOT apply to recessions associated with financial crises.

There's not a single reputable economist at any academic institution, consulting group, or government agency observing or predicting a V shaped recovery. They are ALL saying this will be a long, slow, painful recovery. The data, from every angle, bears that out.

The letter is just a convention for describing what we see. The reality is the pace of recovery and the human impact. Any shape we see emerging now is not guaranteed to continue its current trajectory, particularly if there are permanent structural changes in the economy which is most definitely true.

A 22% recovery does not come close to a 36% decline over the same time period. Both the angle at the bottom and the intellect of people who see a V are more obtuse than that. Even a V shaped recovery of home sales doesn't account for the vastly lower prices received. There's more to analysis than looking at the shape of a line on a time series chart.

Anyone who sees a V shaped recovery is either illiterate, dyslexic, or delusional.

 
At 5/26/2010 11:50 AM, Anonymous Anonymous said...

@Cantonese

You are incorrect. I know of at least one respected economist, Brian Wesbury at First Trust, who has been predicting a V-shaped recovery since December of 2008. I thought he was nuts at the time, but he's been spot on so far.

Here's his bio...

Brian Wesbury is Chief Economist at First Trust Advisors L.P., a
financial services firm based in Wheaton, Illinois. The Wall Street
Journal ranked Mr. Wesbury the nation’s #1 U.S. economic
forecaster in 2001 and USA Today ranked him as one of the nation’s top 10 forecasters in 2004.

Mr. Wesbury writes frequently for the editorial page of The Wall
Street Journal and is the Economics Editor of “The American
Spectator.” He is also a frequent guest on Fox, Bloomberg, CNBC TV and BNN Canada TV.

Mr. Wesbury is a member of the Academic Advisory Council of the Federal Reserve Bank of Chicago and is also an adjunct professor of economics at Wheaton College in Wheaton, Illinois. Additionally, he sits on the Board of Managers of Three-Sixty Advisory Group, a Pasadena, California based consulting and private-equity firm.

Mr. Wesbury began his career in 1982 at the Harris Bank in Chicago. Former positions include Vice President and Economist for the Chicago Corporation and Senior Vice President and Chief
Economist for Griffin, Kubik, Stephens, & Thompson. In 1995 and 1996, he served as Chief Economist for the Joint Economic Committee of the U.S. Congress.

Mr. Wesbury received an M.B.A. from Northwestern University’s
Kellogg Graduate School of Management, and a B.A. in
Economics from the University of Montana. McGraw-Hill published his first book, The New Era of Wealth, in October 1999. He has a new book, It’s Not As Bad As You Think
published in November 2009 by John Wiley & Sons.

 
At 5/26/2010 12:11 PM, Anonymous gettingrational said...

@ Catonese, V does describe the parth of the U.S. econonmy this last year. Your background may not have an alaphabet but surely there must be a character, or group of characters, that describe a recovering economy in dramatic ways. Maybe you are angry with the emergance of Mandarin and present day in general?

 
At 5/26/2010 12:55 PM, Anonymous Anonymous said...

My handwriting is worse than my typing. My V's are all over the map, but they are stll V's.

Can we be not so literal about this?

Have we passed the bottom and are we on our way back up?

If we agree on that, THEN can we argue about the slope?

 
At 5/26/2010 4:21 PM, Anonymous Catonese said...

Who said I was Chinese? Don't make dumb assumptions.

Brian Wesbury is not a respectable economist. He's a salesman of himself - nothing more.

The point of a V shaped recession is that recovery is QUICK. That is not the case now and will not be the case. Describing the recovery as a V is a lie or a delusion.

There are also numerous hazards which could cause and are likely to cause a reversal of all these gains. The signs are there and the very industries reported here put those risks in their reports.

The stock market is now at the same level it was in 1998. The average holding period returns, by month, from the first time we crossed 10,000/1100 is negative 3.1% for the DJIA and negative 5.5% for the S&P assuming we close the month at 10,000 and 1100 respectively. That is a lot of wealth destroyed and I don't think the market is done dropping yet. I'll be here at year end telling you "I told you so." I'll also come back to gloat about house prices being right around where they are now.

 
At 5/26/2010 4:29 PM, Blogger PeakTrader said...

If we avert a double-dip recession, a U-shaped recovery will be completed in 2016 or 2017.

A bigger "Lost Decade" will begin in 2029, when the last of the Baby-Boomers (born between 1946-64) reach 65.

 
At 5/26/2010 4:42 PM, Blogger PeakTrader said...

Many people underestimate, or have no idea, how much damage the Federal government has done in placing massive inefficiencies and building-up debt.

 
At 5/26/2010 8:16 PM, Blogger PeakTrader said...

Here's what Joseph E. Stiglitz, Nobel Prize winner, former chief economist of the World Bank and a professor of economics at Columbia University said:

“We were counting on a weak dollar and a strong European economy; instead we got a strong dollar and a weak Europe — that is clearly not good for our economy. It certainly increases our likelihood of a double-dip recession.”

My comment: One bright spot is the interest paid on the national debt. For example, currently, the 1-year Treasury yield is 0.37%. In 2006, it was 4.94%.

However, if it rises to the 2007 level of 4.53%, that's one way to achieve a sharp economic slowdown, given the high level of Federal debt.

 
At 5/26/2010 10:32 PM, Anonymous grant said...

PT?
It's good to see you are a Stiglitz fan too.
I think you are right this Government is doing nothing to change even the smallest thing to create more efficiency and to reduce cost's in anything in the economy. They are absolutely hopeless and should be impeached TODAY! EVERYTHING THEY DO IS WRONG.

 
At 5/26/2010 11:45 PM, Blogger grant said...

WIKIPEDIA THIS:-
Leonid Brezhnev: Then go down to the heading Stagnation and read:about the new America under embalmer.

 
At 5/27/2010 12:50 AM, Blogger PeakTrader said...

Basic math of the national debt:

When the national debt reaches 100% of GDP:

$15 trillion income (or output)

$15 trillion Federal debt

Interest rate (rises to) 4%

Interest payment $600 billion

Historical Federal tax collection rate 19.5%; round up to 20% equals $3 trillion.

So, 20% of tax revenues to pay interest on the national debt (does not include payment of any principal).

"In 2008, $242 billion was spent on interest payments servicing the debt, out of a total tax revenue of $2.5 trillion, or 9.6%."

 
At 5/27/2010 1:59 AM, Anonymous gccci said...

since 2001, inflation has averaged a bit over 2%.
8 years at 2% = 17.1% increase in price level.
193bn/1.17 = 164bn, barely above the 2001-2 lows from last recession in real terms.
good post !

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