Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Durable Goods Orders Down Again, Worse Than Forecast

Published 06/27/2017, 01:09 AM
Updated 07/09/2023, 06:31 AM

The Advance Report on Manufacturers’ Shipments, Inventories, and Orders released yesterday gives us a first look at the latest durable goods numbers. Here is the Bureau's summary on new orders:

New orders for manufactured durable goods in May decreased $2.5 billion or 1.1 percent to $228.2 billion, the U.S. Census Bureau announced today. This decrease, down two consecutive months, followed a 0.9 percent April decrease. Excluding transportation, new orders increased 0.1 percent. Excluding defense, new orders decreased 0.6 percent. Transportation equipment, also down two consecutive months, drove the decrease, $2.7 billion or 3.4 percent to $75.4 billion. Download full PDF

The latest new orders number at -1.1% month-over-month (MoM) was worse than the Investing.com consensus of -0.6%. The series is up 2.7% year-over-year (YoY).

If we exclude transportation, "core" durable goods came in at 0.1% MoM, which was below the Investing.com consensus of 0.5%. The core measure is up 5.5% YoY.

If we exclude both transportation and defense for an even more fundamental "core", the latest number is up 1.0% MoM and up 4.8% YoY.

Core Capital Goods New Orders (nondefense capital goods used in the production of goods or services, excluding aircraft) is an important gauge of business spending, often referred to as Core Capex. It is down 0.2% MoM and up 5.0% YoY.

For a look at the big picture and an understanding of the relative size of the major components, here is an area chart of Durable Goods New Orders minus Transportation and Defense with those two components stacked on top. We've also included a dotted line to show the relative size of Core Capex.

Durable Goods Components

The next chart shows year-over-year percent change in Durable Goods. We've highlighted the value at recession starts and the latest value for this metric.

Core Durable Goods with YoY change

The next chart shows year-over-year percent change in Core Durable Goods (i.e., excluding transportation).

Core Durable Goods

The next chart shows the growth in Core Durable Goods overlaid on the headline number since the turn of the century. This overlay helps us see the substantial volatility of the transportation component.

Core Growth

Here is a similar overlay, this time excluding Defense as well as Transportation (an even more "core" number).

Core ex-Defense

Core Capital Goods

The next two charts take a step back in the durable goods process to show Manufacturers' New Orders for Nondefense Capital Goods Excluding Aircraft, a series often referred to as Core Capex. Here is the year-over-year Core Capex.

Core CAPEX YoY

The next chart is an overlay of Core Capital Goods on the larger series showing the percent change of the two since the turn of the century.

Core CAPEX Growth

In theory, the durable goods orders series should be one of the more important indicators of the economy's health. However, its volatility and susceptibility to major revisions suggest caution in taking the data for any particular month too seriously.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.