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 27 July 2016

Durable Goods New Orders Declined Significantly in June 2016

Written by Steven Hansen

The headlines say the durable goods new orders declined. The unadjusted three month rolling average declined significantly this month and is now in contraction. This was not a good report.


The big drag this month was civilian aircraft - but most sectors were in contraction..

Econintersect Analysis:

  • unadjusted new orders growth decelerated 11.2 % (after accelerating a revised 3.3 % the previous month) month-over-month , and is down 6.6 % year-over-year.
  • the three month rolling average for unadjusted new orders decelerated 1.7 % month-over-month, and down 0.3 % 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 11.2 % year-over-year.
  • Backlog (unfilled orders) decelerated 1.1 % month-over-month, but is still contracting 1.9 % year-over-year.
  • The Federal Reserve's Durable Goods Industrial Production Index (seasonally adjusted) growth improved 0.9 % month-over-month, up 0.7 % 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, but the trend over the last year is relatively flat.

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

  • note this is labelled as an advance report - however, backward revisions historically are relatively slight.

Census Headlines:

  • new orders down 4.0 % month-over-month.
  • backlog (unfilled orders) decreased 0.9 % month-over-month.
  • the market expected (from Bloomberg):
Consensus Range Consensus Actual
New Orders - M/M change -3.6 % to 2.0 % -1.3 % -0.4 %
Ex-transportation - M/M 0.0 % to 0.9 % 0.3 % -0.5 %

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 long term trend is flat growth depending on periods selected.

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 generally slowly decelerating.

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.

>>>>> 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


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
Main Home
Analysis Blog
Rising Tide Does Not Lift All Ships
Comments on Feyerabend’s ‘Against Method’, Part II
News Blog
Docking A Huge Cruise Ship Is More Complicated Than You Think
New Seasonal Outlook Updates from NOAA and JAMSTEC - Let's Compare Them.
Infographic Of The Day: Driving Into A Battery Powered Future
Earthquake Risk - Location Matters
Investor Alert: Be On The Lookout For Investment Scams Related To Hurricane Matthew
Lost In Translation: Five Common English Phrases You May Be Using Incorrectly
The Size And Scope Of Samsung's Business
Immigration Is The Top Worry For Britons
People Killed By Russian Airstrikes In Syria
Have You Taken These 4 Simple Steps To Improve Your Trading?
14 October 2016: ECRI's WLI Growth Index Insignificantly Declines
Mom Breaks Down In Tears When Son With Autism Meets Service Dog
Rail Week Ending 15 October 2016 Paints A Negative Economic View
Investing Blog
FinTech Is Taking A Bite Out Of Banks
Options Early Assignment - Should You Worry?
Opinion Blog
US 2016 Election: Will US-China Relations Change
Prop. 51 Versus A State-Owned Bank: How California Can Save $10 Billion On A $9 Billion Loan
Precious Metals Blog
How Will The Election Outcome Impact Precious Metals?
Live Markets
21Oct2016 Market Close: Major US Indexes Close Flat On Low Volume, Crude Prices Resume Climb, US Dollar Stabilizes In Mid 98 Handle, Yes, Most Investors Are Worried Which Way This Market Will Go
Amazon Books & More

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

Crowdfunding ....



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


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site 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