Home   Logon   Mobile Site   Research and Commentary   About Us   Call 1.800.621.1675 or Email Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Click for Bio
Follow Brian on Twitter Follow Brian on LinkedIn View Videos on YouTube
   Bob Stein
Deputy Chief Economist
Click for Bio
Follow Bob on Twitter Follow Bob on LinkedIn View Videos on YouTube
 
  New Orders for Durable Goods Declined 3.4% in December
Posted Under: Data Watch • Durable Goods

 
Implications: It's certainly not good when orders for durable goods decline rather than rise, but we would take the 3.4% drop in December with a big grain of salt. Almost all of the decline was in the transportation sector, led by aircraft, orders for which are extremely volatile from month to month. Outside the transportation sector, orders still slipped 0.8%, but are up 3.8% from a year ago. Orders ex-transportation are down three months in a row, but these orders were down five months in a row in mid-2012 even as the economy was expanding at a 2% annual rate. What we're probably seeing is some reaction to lower oil prices, which is reducing orders for equipment used to explore for oil. Next week's report on factory orders will provide more details. The worst news in today's report was that "core" shipments," which exclude defense and aircraft, declined 0.2% in December and were down at a 3.3% annual rate in Q4 versus the Q3 average. As a result, it now looks like business investment in equipment shrank at a 3.5% annual rate in Q4. In turn, we're marking down our forecast for Q4 real GDP growth to a still healthy 3.1% annual rate from a prior estimate of 3.3%. Keep in mind, though, that the drop in orders is not consistent with ongoing gains in manufacturing production. Signaling future gains in output, unfilled orders for "core" capital goods rose 0.2% in December, hit a new record high, and are up 8.6% from a year ago. Expect more of the same, as lower oil prices mean higher production outside the oil sector. Orders and shipments for durables should accelerate in the year ahead. Consumer purchasing power is growing with more jobs and higher incomes, while debt ratios remain very low, leaving room for an upswing in big-ticket spending. Meanwhile, profit margins are high, corporate balance sheets are loaded with cash, and capacity utilization is breaching long-term norms, leaving more room (and need) for business investment. In other news this morning, the Richmond Fed index, which measures mid-Atlantic manufacturing sentiment, came in at +6 in January versus +7 in December, signaling continued growth.

Click here for PDF version
Posted on Tuesday, January 27, 2015 @ 11:43 AM • Post Link Share: 
Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2021 All rights reserved.