Sometimes a chart is nearly all you need to understand the story. This is one of those times.
Military vs. Non-Military Durable Goods
click on chart for sharper image
Durable Goods Shipments Down 20%
With that stunning graphic out of the way, please consider some interesting factoids from Why a Recovery May Still Feel Like a Recession.
- Durable goods shipments fell by more than 20 percent during this recession, and would have declined further were it not for increased production of weapons.
- In no previous downturn since 1958, when the figures began being recorded, had the decline been as much as 14 percent.
- The drop is all the more remarkable because such shipments rose at a relatively restrained rate in the preceding period of economic growth, particularly when military sales were excluded.
- In June, seasonally adjusted shipments for civilian purposes were 19 percent below the average monthly figure for 2000. Shipments of military items were running 123 percent above the 2000 average.
- Those figures are in nominal dollars, not adjusted for inflation. That fact may exaggerate the trend, since prices of some durable goods, like computers, have fallen over the years.
Given the amount of durable goods that go into homes (washers, dryers, microwaves, stoves, refrigerators, etc), and given the enormous boom in housing from 2003-2007 that chart is a stunning description of the state of our economy.
However, the chart is misleading in once sense. Military spending accounts for only 8% of durable goods orders. Then again, military spending was only 3% in 2000 according to the article.
Perhaps the bottom is in, but please don't expect the "recovery" to take us back to 2007 levels of spending any time soon. Housing, commercial real estate, and autos will remain weak for years to come.
Mike "Mish" Shedlock
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