August 2011 Durable Goods Data Shows Underlying Growth

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.

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3 replies on “August 2011 Durable Goods Data Shows Underlying Growth”

  1. Looking at this 1st chart, and at 09 vs 10 vs 11, is like looking a the Calculate Risk RE sales prices for cities – upside down of course.

    But, according to your 1st chart each and every month in 10 was UP from 09; and each and every month in 11 is UP from 10. Equally, no. But, in your 2nd chart you show that the charts are bouncing up and down anyway.

    So, how did we get to “see”-ing a declining Trend Line?

    Chart 3 validates the drop in 09 from 08; and the increases in 10 from 09 and in 11 from 10. So, what is “new(s)” about this month?

    Autos are down and Boeing planes are up? Do we gain as many jobs building planes – at Boeing there not as good paying as they once were, but…? As we loose when we stop building cars N trucks?

  2. Oh, and we DO know that those little “planes” are really only “assembled” anymore, from parts imported from all over the world.

    Whole “fleets” of 7xx “wings” from China brought into Everett on container ships, and then up the Mukilteo hill, literally, to the Paine Field Boeing 747 factory on specially designed flatbed railroad cars. To be “attached” by workers who can only get to work on the Boeing Freeway – oft in Japanese cars, assembled in Californication.

    So that we can sell those “American made” planes back to China, and Japan.

  3. Second chart: The trend line is a less good trend line when comparing sales year-over-year (not a contraction but expansion). the expansion was becoming less and less good.

    Third Chart: validates the durable goods sector is expanding again after a flat period in the 2Q.

    General: remember the inflation rate for this sector rose to 7%, and expansion of sales would have to be higher than 7% to be really growing.

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