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Tuesday, January 06, 2015 12:20 PM

Economists Upbeat Despite 4th Consecutive Decline in Factory Orders; Auto Orders vs. Expectations

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Economists are among the most optimistic groups on the planet. Year in, year out they project improvements in growth.

So today, despite 4th Consecutive Decline in Factory Orders, it's no surprise that economists remain optimistic.

Orders to U.S. factories fell for a fourth straight month in November, with demand in a key category that signals business investment plans down for a third month.

The Commerce Department said Tuesday factory orders dropped 0.7 percent in November after a similar 0.7 percent fall in October. The November weakness came from decreases in demand for primary metals, industrial machinery and military aircraft.

A closely watched category that serves as a proxy for business investment spending dropped 0.5 percent in November, marking the longest stretch of weakness in this category since 2012.

Economists, however, remain optimistic that the drop in orders is a temporary soft patch and a stronger economy with increased consumer spending will trigger a rebound in demand in 2015.
New Order Details

The US Census Bureau Manufacturers’ Shipments, Inventories and Orders Report for November 2014 shows New orders for manufactured goods are down for four consecutive months.

Overall Highlights

  • November aggregate decline was 0.7%.
  • Excluding transportation, new orders decreased 0.6%
  • Excluding defense, new orders down 0.4%
  • Durable goods new orders down 0.9%
  • Nondurable goods down 0.5%
  • Shipments down three of last four months
  • Durable goods orders down three of last four months
  • October decline 0.7%.

Transportation Equipment

  • Transportation equipment (Aggregate) down 1.3%
  • Automobiles down 2.0%
  • Heavy duty trucks down 4.4%
  • Motor vehicle bodies, parts, and trailers up 0.5%
  • Nondefense aircraft and parts down 4.7%
  • Defense aircraft and parts down 2.3%
  • Ships and boats up 0.7%

Auto Orders vs. Expectations

Automobiles orders down 2.0% and heavy duty trucks down 4.4% are standouts. Those numbers suggest the auto party is over or will soon be.

I have a simple question: Who wants a car, needs a car, can afford a car, and does not have a car? Subprime auto loans are a key reason car sales were as robust as they have been.

Nonetheless (from the first link) "Auto sales are expected to reach their highest level in a decade this year, bolstered by strong job gains and cheap gas."

Mike "Mish" Shedlock

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