Durable Goods New Orders Up 1.9% for Advance Report, May 2011

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.

 

Durable Goods

 

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.

 

Durable Goods Percent Change

 

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.

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Fear

This report eased my mind a little. I am scared of the insane deficit reduction austerity fake crisis crap spewing out of washington. We need some freaking revenue and the administration and Harry Reid better stand up and tell the American people.
My idea is help the dumb, bigmouth, repug zealots find political cover. Leave payroll taxes out completely. Dividends, capital gains and bogus deductions should give us a sizable revenue increase. Then the Republicans can tell Grover they didn't violate the no tax oath.

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GDP based on inventories is not real growth to me

While this was a surprise, I think Q2 GDP is going to be close to zero the way things are going from these monthly reports.

We've had inventories now at all time highs, la de da, real demand in the economy is flat.

But what pisses me off is we have zero choice, nothing from this government. Obama is busy pimpin' for corporate lobbyist global agendas and Republicans want to screw poor people and claim it's all about "deficit reduction".

Bad, bad scene.

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The patient is alive anyway

Robert Oak, you are like a physician tending a sick patient, hoping to find grounds for some optimism.

Maybe rising inventories could be a leading indicator of a recovery, but couldn't that also be a leading indicator of a downturn?

To me, if there are known multivariate models that are reliable, okay, then maybe the data say something ... but what? Otherwise, it looks like sorting all data into two boxes:

the + box and the - box

And as far as any sane physician can tell, the result is NO CHANGE, at best.

An angry crowd of Republicans clamor that the patient must be released -- the problems are all iatrogenic. The hospital administrator has indicated a willingness to compromise, saying "The patient has made remarkable progress and should be released as soon as the bill has been paid."

The problem about the bill is that although alive, breathing on oxygen, the patient is not fully conscious and appears to be unable to sign anything. Those with POA for the patient cannot agree on anything.

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