econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 24 September 2015

Durable Goods New Orders Declined in August 2015. Rolling Averages Improved.

Written by Steven Hansen

The headlines say the durable goods new orders declined. This series has been in a general downtrend since seen since November 2014. The three month rolling average improved this month but remains in contraction. Note that there is significant deviation between the unadjusted and the adjusted data..

Econintersect Analysis:

  • unadjusted new orders growth accelerated 18.2 % (after decelerating a downwardly revised 19.6 % the previous month) month-over-month , and is down 1.9 % year-over-year.
  • the three month rolling average for unadjusted new orders accelerated 1.3 % month-over-month, and down 7.4% year-over-year.

Year-over-Year Change of 3 Month Rolling Average - Unadjusted (blue line) and Inflation Adjusted (red line)

  • Inflation adjusted but otherwise unadjusted new orders are down 3.8 % year-over-year.
  • The Federal Reserve's Durable Goods Industrial Production Index (seasonally adjusted) growth decelerated 0.9 % month-over-month, up 1.3 % year-over-year [note that this is a series with moderate backward revision - and it uses production as a pulse point (not new orders or shipments)] - three month trend is decelerating, and has been decelerating for a year..

Comparing Seasonally Adjusted Durable Goods Shipments (blue line) to Industrial Production Durable Goods (red line)

  • unadjusted backlog (unfilled orders) growth decelerated 0.6 % month-over-month, down 1.2 % year-over-year.
  • according to the seasonally adjusted data, most of the data was soft - but civilian aircraft was very soft.
  • note this is labelled as an advance report - however, backward revisions historically are relatively slight.

Census Headlines:

  • new orders decreased 2.0% month-over-month.
  • backlog (unfilled orders) decreased 0.2% month-over-month.
  • the market expected (from Bloomberg):
Consensus Range Consensus Actual
New Orders - M/M change -3.3 % to 0.4 % -2.0 % -2.0 %
Ex-transportation - M/M -1.0 % to 1.3 % +0.3 % +0.0 %

Durable Goods sector is the portion of the economy which provides products which have a utility over long periods of time before needing repurchase - like cars, refrigerators and planes.

Econintersect concentrates on new orders as it is the entry point for future production - and somewhat intuitive economically.

Indexed and Unadjusted Durable Goods New Orders - Orders (blue line) and Orders less Transports (red line)

The trend is down.

Year-over-Year Growth Durable Goods New Orders - Unadjusted (blue line) and Inflation Adjusted (red line)

The above graphic shows both the year-over-year change for unadjusted new orders and inflation adjusted new orders using the PPI for inflation adjustment.

For unfilled orders (graph below), the growth trend (red line in graph below) is downward.

Unadjusted Durable Goods Unfilled Orders - Current Value (blue line, left axis) and Year-over-Year Change (red line, right axis)

To visualize the drivers of durable goods - the chart below shows transport (mostly aircraft is the volatile element in durable goods.

Unadjusted Durable Goods New Orders Year-over-Year Growth - Consumer Goods less transport (blue line), All Durable Goods (green line), and Transport (red line)

FRED Graph

One final look at the Durable Goods data in our search for a slowing economy is for inventory buildup. Although this series is noisy, it appears inventory levels are currently elevated.

Unadjusted Inventory to Sales Ratio

Caveat on the Use of Durable Goods

The data when first released is subject to several months of revision. The revisions currently have been minor - making the initial headline data reasonably accurate in real time.

The data in this series is not inflation adjusted - and Econintersect adjusts using the appropriate BLS Producer Price Index for durable goods or uses Industrial Production (IP) - durable goods sub-index which is a non-monetary index.

As in most US Census reports, Econintersect does not agree with the seasonal adjustment methodology used and provides an alternate analysis. The issue is that the exceptionally large recession and subsequent economic roller coaster has caused data distortions that become exaggerated when the seasonal adjustment methodology uses several years of data. Further, Econintersect believes there is a New Normal seasonality and using data prior to the end of the recession for seasonal analysis could provide the wrong conclusion.

Econintersect determines the month-over-month change by subtracting the current month's year-over-year change from the previous month's year-over-year change. This is the best of the bad options available to determine month-over-month trends - as the preferred methodology would be to use multi-year data (but the New Normal effects and the Great Recession distort historical data).

Durable goods expenditure is a major element of GDP. Therefore may pundits look for enlightenment within the durable goods data for economic direction. To illustrate how durable goods new orders and backlog fits into a recession watch, the Fred graph below (produced based on August 2011 data) shows clearly that data trends down preceding a recession. Unfortunately, there are several false indications of recessions.

More importantly, durable goods as discussed in this post is not the durable goods of the consumer - as it includes business and government consumption while excluding imports. For a better understanding of consumer demand for durable goods, the BEA's Personal Consumption Expenditure's Durable Goods data series should be used:

Durable goods is not a good economic forecasting tool as it contains too many false warnings of economic contraction.

Related Articles

Old Analysis Blog

New Analysis Blog

Manufacturing Posts Manufacturing Posts


>>>>> Scroll down to view and make comments <<<<<<



Permanent link to most recent post on this topic

Click here for Historical Releases Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.



You can also comment using Facebook directly using he comment block below.







Econintersect Economic Releases


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
Big Mess in Italy
Are You Feeling the Economic Surge?
News Blog
October 2016 Manufacturing New Orders Improved
3Q2016 (Final): Headline Productivity Improves
October 2016 Trade Data Mixed
October 2016 CoreLogic Home Prices Year-over-Year Growth Rate Now Improved to 6.7%.
Taiwan, Trump And A Telephone: How A Simple Act Called Out A Contradiction In U.S. Diplomacy
Infographic Of The Day: A Beginner's Guide To Encryption
Early Headlines: Asia Stocks Up, Oil Down, GOP Healthcare, Trump Not Reagan Redux, EU Ending?, UK Lost Decade, Putin Taking Over Mid-East, Yuan 'Flash' Crash And More
December 5, 2016 Weather and Climate Report - December Update - Zonal Prevails
Irish Births And Baptisms Visualised
What Happens In The Smartphone Afterlife
Water Intoxication: Are We Drowning In Advice To Drink More Fluids?
The Worldwide Virtual Reality Market Is Set To Be Huge
Average Gasoline Prices for Week Ending 05 December 2016 Rose Over 5 Cents
Investing Blog
Momentum Issues A Warning
The Great Bond Crash Of 2016: 05 December Update
Opinion Blog
The Shale-War Is Over
Fake Science
Precious Metals Blog
Silver Prices Rebounded Today: Where They Are Headed
Live Markets
06Dec2016 Pre-Market Commentary: Wall Street Opens Higher, Crude Prices Fall Sharply, US Dollar Remains Soft, Gold Not Going Anywhere, Investors Waiting For Possible Correction
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government



Crowdfunding ....






























 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved