Total new orders for durable goods, including orders for new transportation equipment, were estimated to have been $238.7 billion in March 2017 on a seasonally-adjusted basis. That is 9% better than the most recent low point figured for June last year. It remains substantially less than the record high reached in July 2014, though an anomaly in Boeing Co’s (NYSE:BA) order history accounts for that one month being so far out of line. March’s estimate is more comparable to the one for June 2013, which is precisely the problem.
The entire world has focused on the first part with once again no appreciation for the second. It truly is 2014 all over, where so long as the numbers were generally positive QE had to be working. Only this year there are no more illusions about QE, or very few that remain rational, leaving expectations for a growth surge to be based on the non-specific overcoming of inertia, if only by sheer will of positivity.
Year-over-year, the numbers are all again positive. Total durable goods orders were up 4.5% in March, while those excluding transportation rose 4.9%. Even capital goods shipments were positive compared to last March (+2.9%), only the second annual increase of the last eighteen months. But these are all just small positives and give off no sign of momentum and acceleration. They merely recall, again, 2014, and even to a lesser degree.
The true nature of our current economic condition is not defined by the narrow comparison to the worst point or points of last year, but instead by wider reflection of what clearly is still missing. Though total durable goods are up 9% from the 2015-16 (near recession) trough, this high point in March is still less than the one in the middle of 2013 almost four years ago. Worse, however, the latest figure remains less than the one for December 2007.
What is revealed by these comparisons is not an economy poised for growth but one stuck between varying degrees of contraction and not contraction. As in 2014, we happen to find the current economy in the latter condition, though without a QE to attach it seems so by mere accident. And like 2014, the mainstream is poised to make far more out of it than is legitimately indicated (especially by sentiment).
By every part of the durable goods data set, the same depression is consistently implied. There was something like a recovery right after the Great “Recession” but one that was alarmingly shallow (lack of symmetry) and then cut short in the 2012 timeframe. The global economy, represented only too well by durable goods, has yet to recover from that point.
If positive numbers continue, which is quite likely as there isn’t any suggestion of more immediate downward pressure, either, durable goods orders are going to surpass the prior “cycle” peak just before the ten-year anniversary. And like the Establishment Survey that erased the same dubious comparative deficiency in the middle of 2015, it will be the celebration of a hollow achievement as if taking ten years to register a new high level of activity is some reasonable standard.
These are the details of what has been an uneven economy, the switch back and forth between positive and negative numbers that over time leaves it going nowhere. It has been called a 2% economy referring to GDP growth that can never get above that mark, but in reality is irregular bouts of activity that cannot be classified by any qualification as “growth.”
What we would need to see as the first signs of breaking out of this depression are unambiguous levels of confidence and a balance to them. In other words, if demand were truly rising and businesses truly responding, then after so many years of languishing double digit growth rates would be a start, and they would reasonably last for many months if not several years. There is a considerable amount of catch-up to be had.
Unfortunately, given the same small indicated improvement in retail sales and other accounts there isn’t anywhere close to enough upward momentum to quickly erase high levels of inventory that still remain. Thus, better numbers in durable goods are about only minor restocking as well as oil prices, both of which absent real positive growth will increasingly be at risk of failing (especially the auto sector) and relatively soon (like calculated inflation rates).
At that point, regardless of monetary conditions, everything slides right back into shallow negative numbers and the whole thing repeats, economists claim there is growth where there isn’t, and the vast majority of the public remains in the dark as to what is going on. The appeal instead to increasingly more radical political attempts to find answers is actually understandable.
This is, as always, the worst case. It can seem counterintuitive to read where the switch from contraction to positive growth is that worst case, but upon seeing it properly as anything but growth the reservation quickly vanishes. It is defined by I wrote in January:
The big problem with these cyclical upturns (depression cycle, not business cycle) is these positive interpretations. It will likely end up being hugely counterproductive (if it continues for long enough) in the same way as 2013-14 was attributed to QE3 and the belief that recovery was at that time not just possible but even likely (it’s amazing in review how in late 2014 the Federal Reserve was more concerned about “overheating” and how that view pervaded, uncritically, the whole mainstream description of what was going on). With that conventional perspective, there was and will likely be far less urgency to do what is necessary, even to (honestly) examine what it is that might be causing this sustained misery because there are seemingly plausible conditions (positive numbers) that suggest an end to the misery finally at hand. The economy ends up like a dog chasing its tail.