MISH'S
Global Economic
Trend Analysis

Recent Posts

Taxpayer Friendly Sites

Alphabetical Links

Thursday, July 25, 2013 2:32 PM


Durable Goods: Seen and Unseen (the Good, the Bad, the Ugly)


Inquiring minds are digging into the latest Durable Goods Report by the Census Bureau.

New orders for manufactured durable goods in June increased $9.9 billion or 4.2 percent to $244.5 billion, the U.S. Census Bureau announced today. This increase, up four of the last five months, followed a 5.2 percent May increase and was at the highest level since the series was first published on a NAICS basis in 1992. Excluding transportation, new orders increased slightly. Excluding defense, new orders increased 3.0 percent. Transportation equipment, also up four of the last five months, led the increase, $9.9 billion or 12.8 percent to $87.1 billion. This was led by nondefense aircraft and parts, which increased $6.5 billion.

Durable Goods Seasonally Adjusted

Durable GoodsSeasonally Adjusted
MonthlyPercent Change
June 2013May 2013April 2013May-JuneApril-MayMarch-April
Total:
Shipments…………229,757229,773226,9150.01.3-0.6
New Orders…………244,494234,581223,0034.25.23.6
Excluding transportation:
Shipments…………160,646160,465160,2110.10.2-0.4
New Orders……………157,420157,369155,7740.01.01.8
Excluding defense:
Shipments………217,464217,701215,110-0.11.2-0.3
New Orders………………230,302223,629213,1243.04.92.6
Manufacturing with unfilled orders:
Shipments……161,645161,836158,586-0.12.0-0.9
New Orders………183,051173,160161,8425.77.04.8
Primary metals:
Shipments…………24,91524,37924,6982.2-1.30.6
New Orders………25,40525,46625,307-0.20.62.3
Fabricated metal products:
Shipments………28,94329,00929,090-0.2-0.32.2
New Orders……29,61729,59329,7120.1-0.41.2
Machinery:
Shipments…………34,21734,62434,255-1.21.1-2.3
New Orders………35,39234,57234,3962.40.51.2
Computers and electronic products:
Shipments………27,47127,25927,5690.8-1.1-3.1
New Orders………21,66122,23921,541-2.63.24.6
Computers and related products:
Shipments………2,2832,3072,336-1.0-1.2-5.9
New Orders…………2,2652,3132,362-2.1-2.1-3.7
Communications equipment:
Shipments……………4,0494,1173,960-1.74.00.6
New Orders…………4,6205,2334,543-11.715.211.9
Electrical equipment, appliances, components
Shipments…………10,30010,40510,195-1.02.1-0.8
New Orders…………10,51910,71210,358-1.83.40.1
Transportation equipment:
Shipments…………69,11169,30866,704-0.33.9-1.0
New Orders…………87,07477,21267,22912.814.88.0
Motor vehicles and parts:
Shipments…………45,16144,56445,1581.3-1.32.3
New Orders………45,34044,75845,1271.3-0.82.3
Nondefense aircraft and parts:
Shipments………11,84012,6379,709-6.330.2-10.0
New Orders………27,26720,75012,34631.468.118.4
Defense aircraft and parts:
Shipments………4,6274,6694,618-0.91.1-9.5
New Orders………5,1074,3034,10618.74.842.8
All other durable goods:
Shipments………34,80034,78934,4040.01.10.8
New Orders………34,82634,78734,4600.10.91.3
Capital goods:
Shipments…………84,18785,51080,950-1.55.6-3.8
New Orders………103,59695,06483,8079.013.45.4
Nondefense capital goods:
Shipments………74,25375,77071,394-2.06.1-3.5
New Orders………91,60186,19076,3746.312.93.5
Excluding aircraft:
Shipments………65,82266,39965,164-0.91.9-2.1
New Orders……69,52669,01367,5310.72.21.2
Defense capital goods:
Shipments………9,9349,7409,5562.01.9-5.7
New Orders………11,9958,8747,43335.219.429.9


Easily Seen 

Note how orders for aircraft can skew the overall numbers. A closer look at the "New Orders" components will show precisely what I mean.

New Orders

  • Total +4.2%
  • Excluding Transportation +0.0%
  • Primary Metals -0.2%
  • Fabricated Metals +0.1%
  • Machinery +2.4%
  • Computers and Electronic Products -2.6%
  • Computers Related Products -2.1%
  • Communications Equipment -11.7%
  • Electrical Equipment -1.8%
  • Transportation Equipment +12.8%
  • Motor Vehicles and Parts +1.3%
  • Non-Defense Aircraft and Parts +31.4%
  • Defense Aircraft and Parts  +18.7%
  • Other Durable Goods +0.1%

One quick glance at new orders will give you the "easily seen" look at the durable goods numbers. Although such analysis is "easily seen" not many bother. Instead, many rely on the baseline reported number.

But what about the "not-so" easily seen? I am talking about constant revisions and the overall use of the report in general.

Revisions

Alan Hartley of Black Cypress Capital says Beware Revisions.
Today the U.S. Department of Commerce reported new orders for manufactured durable goods. One data point often analyzed by investors within the report is “non-defense capital goods ex aircraft”. This is considered a good proxy for business capital spending in the U.S.

That is all well and good, but we find the data less useful than most.

Why? Heavy revisions.

Take June 2012 for instance.

When non-defense capital goods ex aircraft (non-seasonally-adjusted) was originally reported in 2012, it was $67,693. The following month it was revised to $66,452. It was then revised to $64,906. Today June 2012 was revised yet again to $68,555. Over the course of the year, June 2012 looked as though it had fallen nearly 5% from June 2011, only to be revised today to show an actual gain of 0.5%.
History of Non-Defense Capital Goods Ex-Aircraft Revisions 

Here is the telling chart that  Hartley put together.



Core Durable Goods

"Core Durable Goods" are the "total durable goods orders excluding transportation equipment. The new orders numbers are closely followed by market participants as they provide indications on current economic conditions as well as future production commitments in the manufacturing sector."

Today we see Durable Goods Excluding Transportation is +0.0%. If June 2012 is any guide, the number may be off by 5% in either direction.

Of what use is that?

And the reported baseline number of +4.2% is even more useless. Non-defense aircraft orders are up a whopping 31.4% on the strength of 287 new orders for Boeing aircraft.

Such orders are extremely volatile, and cancelable.

The Good, The Bad, The Ugly

  • The Good: The basline number was up 
  • The Bad: The overall core number was flat; Numerous core numbers were negative 
  • The Ugly: Over the course of the next year (or longer), the census bureau is likely to significantly revise all of the numbers in multiple directions, multiple times.

The bad and the ugly clearly outweigh any good in this report. So don't take today's surprisingly good number seriously.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com


Copyright 2009 Mike Shedlock. All Rights Reserved.
View My Stats