Durable Goods Orders

So. What are durable goods orders, and why does anyone care? Well, the durable goods orders report tracks the percent change in manufacturing orders for real, physical products. Positive results mean that new orders are increasing, which is an indication that the manufacturing sector is doing well, which is in turn an indication that GDP may be growing. And everyone likes to see GDP growth.

Now, for January, durable goods orders increased 2.7%. Most of this growth was driven by transportation and defense orders. Ex-transportation, durable goods were down 3.6% while ex-transportation, durable goods orders were only up 1.9%.

Looking at February, the Econoday-surveyed analysts are expecting some slowdown in new durable goods orders, with an increase of only 1.5%.

The US Census Bureau provides us with the actual results. New orders for manufactured durable goods fell 0.9% (substantially missing expectations). Ex-transportation, new orders decreased 0.6%. Ex-defense, new orders increased 0.4%.

Durable Goods Orders

Last month, the market was disappointed by a 2.5% decline in durable goods orders for December. Analysts had been looking for a 1.5% increase, so this was very much a letdown. But, last month's terrible shock notwithstanding, the Econoday-surveyed analysts are still optimistic. They are calling for 3.0% growth for January 2011.

And why are they looking for growth? Why do they care? Because this represents manufacturing orders for real, physical products. Positive results mean that the manufacturing sector is doing well, which can point the way towards positive GDP growth.

But, is the optimism justified? Or are the hopes and dreams of the markets about to be shattered by the cold, hard blow of stark reality? Turning to the US Census Bureau, we find that durable goods orders increased 2.7% in January. Interestingly enough, December's durable goods orders have also been revised upwards from a 2.5% decline to only a 0.4% decline. How that works, I don't know. I just report this.

Ex-transportation, January durable goods orders actually declined 3.6%, implying quite strongly that transportation orders drove quite a lot of the durable goods activity for the month. In addition, ex-defense durable goods orders were up only 1.9%. Obviously, a reasonable chunk of those transportation orders were military vehicles (whether ordered by the DoD or by foreign nations[1], we don't know from the report)..In fact, transportation equipment as a category was up 27.6% and the "defense aircraft and parts" component of that category was up 20.6%. The worst performance for a category came from machinery, which was down 13.0%, and the worst performance for a category component was communications equipment (down 14.4%).

[1] Yes, we do sell tanks and HMMWVs and fighter jets to other countries. Also, assault rifles, anti-armor and anti-aircraft missiles, ammunition, uniforms, and so on and so forth. The Taliban was a great customer of ours, back in the 80's.

Durable Goods Orders! Jobless Claims!

We've got two major sets of data points out now, so let's see if there will be more joy in the US than in Japan this morning.

First off, Durable Goods Orders. We're about to look at the December 2010 figures, and analysts are looking for substantial improvement. November saw a revised decline of 0.1% in orders, or a revised increase of 4.5% in ex-transportation orders. For December, the analysts are burning incense to Plutos Catachthonios and hoping for a 1.5% increase in new orders. And does the US Census Bureau disappoint us? Yes. Yes it does. Durable goods orders declined 2.5% for the month (ex-transportation, they were up a tepid 0.5%). The transportation sector was the biggest loser (new orders down 12.8%), with nondefense aircraft the biggest loser in the sector (down 99.5%[1]).

So, what about First Time Jobless Claims? Will that make the markets happy? We did really well last week - even after revising the figures, we had a better than expected seasonally adjusted 403,000 new claims. Unfortunately, there is no joy to be found in the news from the US Department of Labor, either. Seasonally adjusted, the week ending January 22 saw 454,000 initial jobless claims[2]. The seasonally adjusted insured unemployment level[3] is 3,991,000 (up 94,000) as of the week ending January 15, with the insured unemployment rate at 3.2%.

In domestic news, does anyone remember me talking about the Iraqi Dinar? Good. There is related news, with the US Commodity Futures Trading Commission using provisions in the Dodd-Frank Wall Street reform law and the 2008 Farm Bill[4] to file suit against 14 foreign exchange dealers. The suits allege that the firms named illegally solicited members of the public to engage in foreign currency transactions, and that they operated without being registered with the CFTC. The CFTC is looking for civil monetary policies, as well as trading and registration bans. DinarTrade is not one of the companies named.

[1] Not a typo.

[2] Interestingly enough, the unadjusted numbers came in at 482,399 for the week ending January 22. That's down from the week ending January 15, and also down from the 502,710 initial claims for the comparable week in 2010. Go figure.

[3] I haven't really discussed this figure before. The insured unemployment level is the number of persons who are currently receiving state unemployment insurance payments. It is not used in any way as a measure of actual unemployment, because not everyone who is unemployed receives unemployment insurance benefits.

[4] No, I'm not sure what farming has to do with it either.

Metrics? Yeah, We've Got Them

From all over the world, we have them. The majority are from the United States today, but we have an international coalition of economic activity to review.

Right off the bat, New Zealand has had some bad economic performance. Their Q2 GDP was revised downward to 0.1% growth. Analysts were looking for 0.2% growth for Q3, and were rather surprised to instead see a 0.2% decline. This puts their GDP up 1.4% for the rolling year, missing the expectation of 1.9% by 50 bps. The decline is largely blamed on the manufacturing sector (particularly petroleum, chemicals, plastics, rubber, and machinery and equipment manufacturing), although construction and real estate took a dive as well.

French Consumer Manufactured Good Consumption and PPI are out as well. October was a bad month for French manufacturers. Their PPI was up 0.8% (making production more expensive), and simultaneously consumption of manufactured goods was down a revised 0.6% (down 0.3% year over year). Greater costs plus less actual sales equals a manufacturing sector rocking back and forth in the corner muttering "Redrum, redrum, redrum"[1] over and over again. Did things get better in November, or do all work and no play make Jacque a dull boy?

Well, French manufactured good consumption was up 2.8% in November, beating expectations by 180 bps and bringing the rolling year figures up to 1.5% growth - most of it driven by a 15% increase in automobile sales. The PPI, meanwhile, was up 0.4% (exactly in line with expectations). After that, you'd think the CAC 40 would be doing better than it is today.

Leapfrogging across the Atlantic we arrive in Canada, where GDP (which was down 0.1% in September) is anticipated to be up 0.3% for October. Hope springs eternal, but has been dashed by a dose of cold reality - there was growth, but only 0.2%. This has also pulled their rolling year GDP down to only 3.3%. Weep for the Loonie, my friends. Weep for the Loonie.

And now, the United States! Right now we've got Durable Goods Orders, Personal Income and Outlays, and Jobless Claims. Later, we add Consumer Sentiment and New Home Sales to the mix.

Durable Goods Orders were down 3.3% in October, with analysts predicting a less pessimistic (but still not confident) increase to only down 1.0% for November. The actual Census Bureau report shows that we missed expectations, coming in at a 1.3% decline in durable goods orders. This was largely driven by a 11.9% decline in transportation equipment orders, mostly from nondefense aircraft and parts.

October Personal Income was up 0.5%, with consumer spending up 0.4% and the core PCE price index unchanged. For November, analysts are looking for 0.2% growth in personal income, 0.5% growth in consumer spending, and 0.1% growth in the price index. The Bureau of Economic analysis has not yet seen fit to make the official press release available, so we turn to Econoday to find Personal Income up 0.3% (beating expectations), consumer spending up .4% (missing expectations) and the core PCE price index up 0.1% (right in line with expectations).

First time jobless claims were revised upwards to 423k (up from the original report of only 420k) for the week ending 12/11, and analysts are expecting that same number to happen again for the week ending 12/18. Turning to the US Department of Labor, we see that the advance figure for the week ending 12/18 is 420k new claims - exactly in line with expectations. No single state really stood out with significant increases in first time jobless claims, while New York and North Carolina led the pack in reductions in new claims.

Consumer Sentiment, due at 9:55 AM EST, is expected to climb 80 bps to 75.0%. New Home Sales, due at 10 AM EST, are expected to climb 17k to 300k new units.

[1] Maybe that should be "Ertruem, ertruem, ertruem"?

Korea? PIIGS? Bah! We Have Data!

The futures are up this morning (S&P +3.60/+0.31%, NASDAQ +4.00/+0.19%, Dow +29.00/+0.26% as of 7:59 AM ET). And why are they up? North Korea Crazy [1] is still crazy, and now we're sending the USS George Washington to "join exercises" in the Yellow Sea. (That's an aircraft carrier, if you're wondering.) The Irish government is still on the brink of collapse over whether or not to borrow all the euros [2]; they're getting ready to announce an austerity plan that will save some 15 billion euros over four years [3]. Everybody in Ireland seems to hate this plan.

Now, since we know nothing has changed substantially from yesterday, why are the futures up?

Because, silly, that was yesterday and today is another day. A day filled with economic measures to distract the domestic economy from the possibility that the Korean War (and we are still at war with North Korea) will heat back up, and from the possibility that Ireland could set off a cascading economic Götterdämmerung.

Right now we've got Durable Goods Orders, Personal Income and Outlays, and Jobless Claims to contend with.

Durable Goods Orders are huge. They are new orders placed with domestic manufacturers for delivery of factory hard goods. They represent production and economic growth, because they represent our nation's industrial capacity at work. Positive numbers make people happy. Negative numbers make The Bernank print more money [4]. And the projections aren't that good right now. In September, we saw a 3.3% growth in new orders. Right now, the Street is looking for a 0.1% decrease in new orders. That's not great, but it isn't terrible.

Personal Income and Outlays is, well, a series of measures looking at personal income. And personal outlays. (Whaddya want? It's self-defining!) Did the average wage earner make more or less money? Did that average wage earner spend more or less money? Oh, and did inflation (in the form of core personal consumption expenditures, aka PCE, which has been the Fed's measure of inflation since 2000[5]) go up or down? It's huge because, as I've said before, consumer spending drives GDP. And this measure? This measure is consumer spending.

September saw a 0.1% decrease in personal income, and a 0.2% increase in consumer spending. For October, the Street is looking for a 0.4% increase in personal income, and a 0.5% increase in consumer spending. Yes, they are expecting to see the rate you spend money at increase faster than the amount you earn.

Finally, for the moment, we have New Jobless Claims. For the week ending 11/13, we had 439k new claims. Now, for the week ending 11/20, we're looking for 435k new claims.

And how did the numbers shape up?

Well, the durable goods orders report can be read at http://www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf, the personal income and outlays report at http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm, and new jobless claims at http://www.dol.gov/opa/media/press/eta/ui/current.htm.

The durable goods orders were, in a word, bad. They were down, as expected. What wasn't expected was for them to be down 33 times more than expected (that's a 3.3% decrease, in other words). There was no joy in Mudville, as the poem goes. Mighty Casey has struck out.

Personal income and outlays came in simultaneously slightly better and slightly worse than expected. Personal income was up 0.5%, marginally beating expectations. consumer spending came in at 0.4%, marginally missing expectations. PCE was up 0.4% as well but, since the Street never attempts to predict that figure, it neither exceeded nor missed expectations.

New jobless claims came in better than expected. Rather than the anticipated 435k new claims, we're only looking at 407k. Good news there, as it continues a trend of decreasing jobless claims.

So, that's where we are as of right now. I'll be back in an hour with Consumer Sentiment and New Home Sales.

[1] Their new release "U Lookin' We Shootin'" is all over the international charts, with Pyongyang blaming the South for driving the peninsula to the brink of war through "reckless military action".
[2] Or, at least, 65 billion of them. Although no final figure has been agreed to.
[3] That's about 10 billion in spending cuts - mostly from unemployment benefits and state payrolls. Another 5 billion will come from property taxes and a dramatic increase in personal income tax. But not corporate income tax. That would be foolish.
[4] http://www.youtube.com/watch?v=PTUY16CkS-k
[5] Possibly since it has been lagging behind CPI by about 1/3 since 1992, so it makes inflation measures look better. But I'm cynical.