U.S. Durable Goods Orders Lose Forward Momentum

The durable goods manufacturing sector had a good year in 2013. New orders increased 5.1% for the full year following a 4.1% gain in 2012. These increases were, however, slower than the double-digit gains of the prior two years. Earlier strength in the durable manufacturing sector eased at yearend. Orders for durable goods declined 4.3% (+0.1% y/y) last month following a 2.6% November jump, revised from the initial report of a 3.5% increase. A 1.7% rise had been expected in the Action Economics Forecast Survey. A 17.5% drop (+26.3% y/y) in orders for nondefense aircraft & parts led the outsized decline in bookings last month. In addition, defense aircraft orders were off 12.9% (-51.2% y/y. Weakness in the transportation sector also reflected a 5.8% drop (+7.4% y/y) in motor vehicles & parts orders.

Outside of the transportation sector new orders fell 1.6% (+2.9% y/y) following three months of modest gain. Orders for electrical equipment, appliances & components increased 2.8% (3.7% y/y) and orders for machinery gained 0.8% (14.8% y/y). These increases were offset, however, by a 7.8% slide (-4.3% y/y) in orders for computers & electronic products. Earlier strength in business investment also eased last month. Nondefense capital goods orders fell 5.0% (+11.3% y/y) as orders excluding aircraft declined 1.3% (+6.2% y/y).

Shipments of durable goods declined 1.9% (+2.8% y/y) in December following four consecutive months of increase. Shipments excluding the transportation sector slipped 0.3% (+2.4% y/y), also after four months of gain. Unfilled orders gained 0.4% (7.0% y/y) but order backlogs outside of the transportation sector slipped 0.2% (+6.4% y/y). Inventories of durable goods jumped 0.8% (3.6% y/y), the largest increase since September. Inventories outside the transportation sector rose 0.7% (1.2% y/y).   

The Productivity Paradox: Is Technology Failing or Fueling Growth? from the Federal Reserve Bank of Atlanta is available here http://www.frbatlanta.org/pubs/econsouth/13q4_summary_technology.cfm

The durable goods figures are available in Haver's USECON database. The Action Economics consensus forecast figure is in the AS1REPNA database.

The seasonally adjusted Case-Shiller 20-City Home Price Index gained another 0.9% during November following increases near 1.0% during the prior three months. These lifted the y/y rise to 13.8%, its strongest since February 2006. The 3-month annualized rate of increase remained firm at 12.4% following its slowdown this spring. Home prices in the narrower 10-city group also gained 0.9% (13.9% y/y). Not adjusted for normal seasonal variation, the Case-Shiller 20-City Home Price Index slipped 0.1% in November after a 0.2% October gain.

Among individual cities, prices were strongest in Las Vegas where they rose 27.3% y/y, San Francisco which increased 23.3% y/y and Los Angeles which showed a 21.7 y/y rise. In each of these cities prices remained down roughly 20% or more from the 2006 peaks. Home prices have improved everywhere in the country but to a lesser extent. Gains were logged in New York, Cleveland and Washington D.C. with modest increases of roughly 6.0%. In these cities, prices remain down approximately 15% from their peaks.    

The Case-Shiller home price series is value-weighted, i.e., a greater index weight is assigned to more expensive homes. It is a three-month moving average and is calculated using the "repeat sales method," where the item measured is the price change for a specific house compared to the price for that same house the last time it sold. The nation-wide S&P/Case-Shiller home price indexes can be found in Haver's USECON database, and the city data highlighted below are in the REGIONAL database.

Consumers are feeling better about things. Consumer confidence, as measured by the Conference Board, improved to an index reading of 80.7 this month from December's 78.5, revised from 78.1. The latest gain outpaced the Action Economics Consensus Forecast reading of 78.8. During the last ten years there has been a 45% correlation between the level of confidence and the three-month change in real personal consumption expenditures. 

The present situations reading gained to 79.1 from 75.3 (40.7% y/y) and the expectations indicator rose to 81.8 (36.6% y/y) from 79.9. Business conditions were rated as good by 21.5% of respondents, an expansion high, but only 17.4% thought they would be better in six months, down from 21.4% who thought so in June. Jobs were viewed as hard to get by 32.6% of respondents, an expansion low. Just 15.4% thought that there would be more jobs in six months. A sharply reduced 0.6% of respondents expected to buy a new home in six months. Just 44.9% were going to buy a major appliance. Expectations for the inflation rate fell to 5.1%, the lowest reading since October 2010.   

By age group, confidence improved the most in the youngest age group to a reading of 100.9, a four month high. Confidence in the eldest age group also gained to 71.1, an expansion high, but confidence amongst middle-agers backpedaled to 82.8, down from 90.0 in August.

The Consumer Confidence data is available in Haver's CBDB database. The total indexes appear in USECON and the market expectations are in AS1REPNA.