While many are basking in the headlines that Durable Goods new orders increased 1.9% in May 2011, Econintersect points out that unfilled orders (backlog) decreased. This decrease could be seasonal as it did happen last year (we do not have enough new normal data for seasonal analysis), but it more likely is caused by too much capacity (too many employees).
As employment data was terrible in May, employment levels that are too high is likely a contributing factor in poor employment data.
New orders for manufactured durable goods in May increased $3.6 billion or 1.9 percent to $195.6 billion, the U.S. Census Bureau announced today. This increase, up two of the last three months, followed a 2.7 percent April decrease. Excluding transportation, new orders increased 0.6 percent. Excluding defense, new orders increased 1.9 percent.
Transportation equipment, also up two of the last three months, had the largest increase, $2.7 billion or 5.8 percent to $49.6 billion. This was due to nondefense aircraft and parts which increased $2.7 billion.
However, new orders do appear to be better YoY, but remains in a down trend channel.
What you can take from this graphic is that with the PPI inflation rate being 7.3%, and the YoY improvement in the dollar amount of new orders at 10.75% – real growth is 3.5% YoY. The 3.5% is in the range of transport growth YoY for May.
Here is a look at the components growth analyzed YoY if roughly adjusted for inflation:
- overall +10.75%
- primary metals +27%
- fabricated metals +4%
- machinery +12%
- computers +1%%
- appliances +7%
- transportation +19%
- defense -11%
You might have heard pundits claiming these poor April numbers were caused by Japan, autos, or even Boeing. Isn’t Japan still a problem in May? It boils down to you don’t look a gift horse in the mouth, but you explain away bad data.
Industrial Production Downtrend Continues in May 2011 by Steven Hansen
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April 2011 Manufacturing Data is Really Bad by Steven Hansen
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Philly Fed Business Outlook “Less Good” in May 2011 by Steven Hansen
April 2010 Economic Forecast: Likely at Sub-Cycle Peak by Steven Hansen
Consumers Come to Terms with Frugality by Rick Davis
Business Sales Up Strongly in March 2011 by Steven Hansen