Durable Goods Decline Second Month; Key Take-Aways
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Inquiring minds are digging into the Census Bureau Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for September 2014 for hints at 4th quarter GDP.
The headline data shows new orders for manufactured durable goods in September decreased $3.2 billion or 1.3 percent. This follows an 18.3 percent decline in August.
However, transportation (especially commercial and military plane orders) are so large and volatile, the overall results are nearly useless.
For example: In June, new orders were up 22.5% with transportation orders up 73.3%. Nondefense aircraft and parts orders were up a whopping 315.6%. Last month, nondefense aircraft and parts was down 74% and this month another 16%.
Key Components
Instead of focusing on the headline numbers, let's dive into the report to isolate key components.
The report itemizes all the categories, but it's not easy to scroll through. This table I put together should help.
| Item | Sep | Aug | Jul | Aug-Sep %Chg | Jul-Aug % Chg | Jun-Jul % Chg |
|---|---|---|---|---|---|---|
| Total New Orders | 241,633 | 244,864 | 299,862 | -1.3 | -18.3 | 22.5 |
| Ex-Transportation Orders | 168,186 | 168,603 | 167,491 | -0.2 | 0.7 | -0.6 |
| Ex-Defense Orders | 230,654 | 234,273 | 289,442 | -1.5 | -19.1 | 24.9 |
| Transportation Orders | 73,447 | 76,261 | 132,271 | -3.7 | -42.4 | 73.3 |
| Capital Goods Orders | 91,353 | 95,345 | 144,635 | -4.2 | -34.1 | 52.5 |
| Non-Defense Capital Goods Orders | 81,985 | 86,625 | 136,323 | -5.4 | -36.5 | 60.9 |
| Defense Capital Goods Orders | 9,368 | 8,720 | 8,312 | 7.4 | 4.9 | -17.9 |
| Core Capital Goods Orders | 71,824 | 73,078 | 72,836 | -1.7 | 0.3 | -0.1 |
| Core Capital Goods Shipments | 70,238 | 70,390 | 70,307 | -0.2 | 0.1 | 2.0 |
Line items (except the last line which shows shipments) are new orders, in millions of dollars, seasonally adjusted.
Key Take-Aways
The last two lines are the ones to watch.
Core Capital Goods are non-defense capital goods excluding aircraft. It's a measure of business investment and business sentiment. The 1.7% decline in orders is the largest since January.
Shipments factor into GDP estimates. Core capital goods shipments were down 0.2% this month. Core capital shipments and orders suggest that 4th quarter GDP is not off to a flying start.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
