Durable Goods Decline Second Month; Key Take-Aways

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