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Economy in Brief

Durable Goods Trends Continue Higher
by Robert Brusca March 24, 2010

Broad trends: Durable goods orders and shipments are still rebounding, but the pace of increase has topped out in February when we observe the Yr/Yr trend in the chart. The rise in orders continues to run ahead of shipments growth. That bodes well for the prospect for a further advance in shipments. Also the continuing advance of the Fed surveys for March tells us that the MFG rebound is continuing and argues to interpret current weakness as weather-related disruptions to monthly durable goods data as just the sort we’d expect after seeing the knock-down in hours in the February employment report. The monthly data are showing some weakening trends but when grouped into three-month intervals durable goods trends are holding up much better.

Monthly patterns: Monthly data show shipments are off by 0.6% and falling by 0.1% in January. New Orders rose by 0.5% in February compared to a rise of 3.9% in January. Unfilled orders now are up for two months in a row at 0.4% in February and 0.2% in January. Inventories also are up for two months running by 0.3% in February and 0.1% in January. Despite the two-month drop in shipments, many trends even on a monthly basis still show improvement.

Short-term growth rate trends and progressions - The three-month sequential growth rates show shipments are still growing and at a relatively rapid and steady pace in the most recent three months. Orders are accelerating steadily over increasingly more recent three-month periods. Inventories switch to growing from shrinking over the most recent three-month period. Unfilled orders continue to shrink, but the pace of shrinkage is decelerating.

Summing up - Excluding transportation, orders are weaker but shipments are stronger over 3 months and 12 months. For nondefense capital goods, shipments are declining over three months but orders are extremely strong. Ultimately order strength should bring shipments around as shipments are more likely than orders to succumb to short term disturbances like bad weather.

Durable Goods Orders
Durable Goods 3Mo 6Mo 9Mo 12Mo YearAgo
Shipments 7.0% 8.8% 8.2% 2.1% -17.3%
New Orders 28.1% 17.9% 12.2% 10.9% -26.2%
Unfilled Orders -1.1% -3.6% -4.5% -6.5% -2.3%
Inventories 0.8% -2.7% -6.9% -9.0% 3.4%
I:S Ratio 1.72 1.79 1.89 1.90 1.52
 Excluding Transportation 3Mo 6Mo 9Mo 12Mo YearAgo
Shipments 9.9% 9.9% 9.3% 3.2% -16.1%
New Orders 9.2% 12.9% 12.3% 7.9% -19.9%
Unfilled Orders 3.2% 2.6% 0.4% -3.6% -7.2%
Inventories 0.5% -3.1% -8.2% -11.0% -0.1%
I:S Ratio 1.61 1.67 1.79 1.82 1.53
 Excluding Defense 3Mo 6Mo 9Mo 12Mo YearAgo
Shipments 7.1% 9.3% 8.5% 1.8% -19.3%
New Orders 21.9% 18.1% 14.9% 11.0% -27.7%
Unfilled Orders -0.2% -1.9% -3.1% -6.4% -3.9%
Inventories -0.1% -3.6% -7.9% -10.2% 3.0%
I:S Ratio 1.70 1.78 1.89 1.89 1.48
 NonDefense Capital Goods 3Mo 6Mo 9Mo 12Mo YearAgo
Shipments -0.8% 6.0% 3.6% -0.7% -12.9%
New Orders 58.5% 33.9% 19.1% 21.4% -33.4%
Unfilled Orders -1.4% -4.5% -5.4% -8.0% -0.9%
Inventories 0.0% -3.6% -7.7% -8.7% 10.8%
I:S Ratio 2.30 2.42 2.52 2.51 1.97
Memo: PPI Durables 0.6% -0.5% 0.3% 0.2% 3.4%
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