Econintersect analysis shows August 2011 durable goods new orders grew at 4.5% seasonally unadjusted over July – and is up 14.0% year-over-year. Very strong growth spurt.
The headline seasonal adjustment methodology says durable goods declined 0.1%. Econintersect does not believe the US Census seasonally adjusted data is properly conveying the movements of the raw data.
The drag this month on new orders were autos but that was more than offset by aircraft. Defense spending was not a drag this month.
Durable Goods 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.
August historically is a month with higher than average durable goods sales (new orders). It may be difficult to see in the above graphic how the data compares with previous months. The following graphic shows the year-over-year new order trend lines – and how the August data broke through the ceiling of the current trends.
Also shown in the above graphic is inflation data (orange). Durable goods is reported in current dollars, and cost inflation has increasing, producing a bigger spacing between the blue and orange lines recently. In August 2011, there is a respectable 7.6% growth year-over-year using as deflator the Producer Price Index (PPI) finished goods cost inflation index.
The August data invalidated the current trend line with no clear trend now in place. If the data improves next month, a new potential trend line will have an upward trajectory.
However, there is one more test that can be done on the data to confirm the validity of Econintersect’s analysis that durable goods new orders are growing.
Here unfilled orders has an upward trend clearly in place – even in an inflation adjusted scenario. Unfilled orders do not grow in a contracting economy.
Overall, the question on most people’s minds is whether the economy is entering a recession. This data is inconsistent with a recession scenario.