Whether durable goods new orders increased or decreased in September 2010 revolve around seasonal adjustment methodology. The headlines from the data release:
New Orders: New orders for manufactured durable goods in September increased $6.3 billion or 3.3 percent to $199.2 billion, the U.S. Census Bureau announced today. Up two of the last three months, this increase followed a 1.0 percent August decrease. Excluding transportation, new orders decreased 0.8 percent. Excluding defense, new orders increased 2.9 percent. Transportation equipment, also up two of the last three months, had the largest increase, $7.4 billion or 15.7 percent to $54.8 billion. This was due to nondefense aircraft and parts, which increased $6.6 billion.
Shipments: Shipments of manufactured durable goods in September, down two consecutive months, decreased $0.9 billion or 0.4 percent to $197.4 billion. This followed a 1.4 percent August decrease. Computers and electronic products, down four of the last five months, had the largest decrease, $0.8 billion or 2.3 percent to $33.4 billion.
Unfilled Orders: Unfilled orders for manufactured durable goods in September, up six consecutive months, increased $7.9 billion or 1.0 percent to $813.2 billion. This followed a 0.1 percent August increase. Transportation equipment, up following four consecutive monthly decreases, had the largest increase, $5.8 billion or 1.2 percent to $480.0 billion.
Inventories: Inventories of manufactured durable goods in September, up nine consecutive months, increased $1.7 billion or 0.5 percent to $314.7 billion. This followed a 0.6 percent August increase. Transportation equipment, also up nine consecutive months, had the largest increase, $1.2 billion or 1.5 percent to $82.7 billion.
Econintersect evaluates durable goods based on unadjusted data. The unadjusted graphical picture.
Durable goods has seasonal characteristics. If we throw out 2007 as an anomaly, the average MoM increase between August and September is 3% to 8%. In 2010, the increase was 8% – on the high side of MoM increases. However, if we compare the YoY changes, the analysis of whether durable good’s new orders increased this month becomes less clear.
Comparing YoY increases, September was better than August in 2010, just as in 2005, 2007 and 2008 – but worse in 2006 and 2009. 2008 YoY comparisons are suspect as it was when the recession started to bite. Econintersect believes durable good sales are flat, but would not argue with a methodology which determined a slight increase occurred – but a 3.3% MoM increase is something that we can not support as meaningful.
On a positive note, backlog (unfilled orders) increased in September. This reverses a trend which has been negative for almost 3 years. An increase in backlog is an indication that employment / facilities are correctly sized for market conditions.