Durable Goods Down, But Out?

Posted on Monday, November 30, 2009

Thank you for using rssforward.com! This service has been made possible by all our customers. In order to provide a sustainable, best of the breed RSS to Email experience, we've chosen to keep this as a paid subscription service. If you are satisfied with your free trial, please sign-up today. Subscriptions without a plan would soon be removed. Thank you!

Catching up on some Thanksgiving week releases and saw that durable goods "surprised" to the downside following the upside spike in September. Per MarketWatch:

Orders for U.S.-made durable goods fell in October, declining 0.6% on weaker demand for machinery and defense goods, the Commerce Department reported Wednesday.

Excluding transportation goods, orders fell 1.3%. Economists surveyed by MarketWatch had expected a gain of 0.5% for durable-goods orders, and a gain of 0.4% for orders excluding transportation.

Overall, the report was "disappointing," wrote Millan Mulraine, an economics strategist with TD Securities, in a research note.

However, better times could be coming, according to Mulraine: "Despite the disappointing October print, we continue to maintain our bias for U.S. capital-goods orders to be fairly robust in the coming months as the combination of the U.S. economic recovery and weak dollar bolsters orders."

The reason why this (and other non-spiking economic indicators) are disappointing is that overall levels are still SIGNIFICANTLY below longer term trends (thus STRONG growth is needed just to make up lost ground). The chart below shows just that; while October durable goods new orders were weak, we see the massive drop YTD October vs. a similar period in 2008, thus plenty of room for a strong rebound if / when the economic recovery truly takes hold.