New Orders in Durable Goods increased +1.9% for May 2011. April was significantly revised to -2.7% from -3.6%.
Core capital goods new orders increased +1.6%, after declining -0.8% last month. Core capital goods is an investment gauge for the bet the private sector is placing on America's future economic growth.
For all transportation equipment, new orders jumped +5.8%. Our volatile air-o-planes caused the increase, up 36.5%. Defense aircraft increased also, 5.5% and motor vehicles survived with a 0.6% increase.
We now have two increases in new orders for the last three months, with April being the plunge from hell.
Core capital goods are a leading indicator of future economic growth. It's all of the stuff used to make other stuff, kind of an future investment in the business meter. Core capital goods excludes defense and all aircraft. Shipments in core capital goods increased +1.4%. Machinery is a large part of core capital goods. Note, core capital goods has not recovered to 2007 levels.
To put the monthly percentage change in perspective, below is the graph of core capital goods, monthly percentage change going back to 2000. In January 2009, core capital goods new orders dropped -9.9% and also declined by -9.4% in December 2008.
Inventories, which also contributes to GDP, are at an all time high and up 1.2%. Core Capital Goods inventories increased +0.8%. Last month also was an all time high for inventories. May just broke April's record.
Unfilled orders increased +0.9%. Machinery had a another record on unfilled orders.
Machinery, up sixteen consecutive months, had the largest increase, $3.5 billion or 3.4 percent to $108.7 billion. This was at the highest level since the series was
first published on a NAICS basis in 1992 and followed a 3.7 percent April increase.
Shipments, which contributes to the investment component of GDP, is up 0.3% for May after a -1.4% April plunge. In core capital goods, shipments increased +1.4%, after a -1.5% April decrease which is better news as an approximation and indicator on Q2 2011 GDP growth, although two months out of three have now cancelled each other out to -0.1% for two months out of three for Q2 GDP.
Producer's Durable Equipment (PDE) is part of the GDP investment metric, the I in GDP or nonresidential fixed investment. It is not all, but part of the total investment categories for GDP, usually contributing about 50% to the total investment metric (except recently where inventories have been the dominant factor).
Producer's Durable Equipment (PDE) is about 75%, or 3/4th of the durable goods core capital goods shipments, used as an approximation.
What is a durable good? It's stuff manufactured that's supposed to last at least 3 years. Yeah, right, laptops and cell phones.