Tags: Durable | goods | orders | defense

Durable Goods Signaling Economic Slowdown

By    |   Wednesday, 27 May 2015 11:33 AM

Spin doctors are working overtime explaining why the latest news about durable goods orders really isn't that bad.

The Census Bureau reported new orders for manufactured durable goods in April fell by 0.5 percent. But excluding transportation, new orders increased 0.5 percent. Or, we can exclude the defense sector and claim new orders increased 0.2 percent.

The economy cannot exclude some sectors to make reports look better. The rationale for excluding transportation is that airlines and railroads order new equipment sporadically. Defense could be excluded because the sector depends on government spending and the spending pattern is uneven.

These exclusions are used to make the report sound better, but in reality the economy spends dollars from defense, transportation or other dollars in the same way. To gauge the economy as a whole, analysts should look at all orders.

It's also important to look at the report as a leading indicator. Orders lead to cash changing hands months from now. New orders are showing us the expected pace of growth six months from now.

Viewed this way, the economic outlook is perilous. New orders have fallen in seven of the past eight months compared with six months earlier. The economy is slowing and new orders indicate the decline could continue for some months.

Focusing on the data instead of the spin shows there is cause for concern and the stock market is the most vulnerable part of the economy right now.

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MichaelCarr
Spin doctors are working overtime explaining why the latest news about durable goods orders really isn't that bad.
Durable, goods, orders, defense
240
2015-33-27
Wednesday, 27 May 2015 11:33 AM
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