Durable Goods Orders Down Second Month: Very Ugly Numbers Excluding Defense

Mish

Durable goods orders fell 0.6% in May after declining an upwardly revised 1.0% in April.

The Census Department Advance Report on Durable Goods sports some ugly numbers for May.

  1. New Orders: -0.6%
  2. Excluding Transportation: -0.3%
  3. Excluding Defense: -1.5%
  4. Motor Vehicles and Parts: -4.2%
  5. Defense Aircraft and Parts: +21.1%
  6. Nondefense Capital Goods: -2.0%
  7. Nondefense Capital Goods Excluding Aircraft: -0.2%
  8. Defense Capital Goods: +15.1%

Those are some of the worst numbers I have seen in a long time. Defense orders masked an extremely weak report.

Shipments, a direct GDP feed, were down 0.1% in May and flat in April.

Mike "Mish" Shedlock

Comments (11)
No. 1-11
JonSellers
JonSellers

Without a massive budget deficit being spent on a massive military welfare system, the economy would be in the toilet.

nic90750
nic90750

what about booming consumer spending at the retail level, white hot housing markets where anything that comes on the market receives multiple offers over asking within days (if not hours) of being listed, and the 3.8% unemployment rate?? How do those relate to massive military welfare system? and the three I mentioned are leading the economy to possibly 6% GDP in the 2nd half 2018

Realist
Realist

It seems that most posts on this site are either over-optimistic or over-pessimistic regarding US economic growth. Nic, at 6%, is the most optimistic I’ve seen. Mish, of course, is usually bearish. I will continue to predict 2% growth over the next few years provided Trump doesn’t start a full-blown trade war. (And he’s getting close!)

Stuki
Stuki

And, as long as neither mindlessly putting Washington's face on paper sheets, nor constructing bomb craters in faraway corners of the world, produces one lick of value............. where does that then, inevitably, leave "the economy" ?

bradw2k
bradw2k

Booming consumer spending and housing markets, coupled with extremely low savings rates, say less about aggregate productivity and more about the shrinking range of financial consciousness in America. Your neighbors are burning savings/capital, and/or "investing" it in high-risk assets. Of course, this is largely due to the perverse incentives of a system that has killed the yield of safe investments.

hmk
hmk

If you back out govt deficit spending since the GFC growth would be subpar to say the least. Also if interest rates weren't suppressed below levels the normal free market would have, growth would be even lower. However anecdotally I don't think a slow down is imminent these data fluctuate and I think its a temporary blip.

Carl_R
Carl_R

Retail sales are mostly imported goods, so they have less impact on GDP than you might think. Real estate markets are dependent on interest rates. If the expectation is for rates to continue to rise, you would expect a late surge of buyers trying to lock in low rates, followed by a later drop when rates do rise. Will both stay high? Or is this a last buying binge by consumers, to be followed by a drop?

I am not surprised to see both high real estate sales, and high retails. I also expect a high rate of buying of cars, which will be hard hit by tariffs and see a sizeable increase. I don't think it is sustainable, however, and I think it will be short lived.

nic90750
nic90750

I don't know how all these fresh faced kids who look just a few years out of college can afford all this stuff.. Ex. Newbury street in Boston is packed any weekday and everyone has the latest iphone. Young and attractive is necessary to get ahead these days. Ofcourse we have (and need ) a huge service class of employees all minority or recent immigrant to service these rich,white and youmg millennials who are working in tech not any white-collar job here in the Boston area making $15 an hour when studio apartments rent for $2000 and up.

Carl_R
Carl_R

Thanks, Mish, for that chart. I never used the term "white hot housing". In any case, your chart shows that for the last two years existing housing sales have been stronger than they have have been in any period since 2006, and this has remained true even in the face of rising interest rates. I believe it is people trying to buy before rates go higher, and that that effect is about spent, and we will see a significant fall in existing home sales. I'm not talking about 1-2%, either. I'm thinking more in terms of a 10-15% decline. Of course, this month's drop may be the the start of that.

Now, if long term rates fall again, as you predict, housing sales may remain stronger than I expect.


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