Durable Goods New Orders Down 1.3% for November 2010

New Orders in Durable Goods dropped -1.3% for November 2010, after last month's -3.1% decrease, revised. New orders has declined 3 of the past 4 months. New orders in non-defense capital goods decreased -6.8%. Core capital goods new orders increased 2.6%. Nondefense aircraft & parts new orders dropped -53.1% and shipments declined -8.6%.


Durable Goods


Below is the percentage change in durable goods since January 2008.


Durable Goods Percent Change


The report data is really about volatile Aircraft & parts. Realize businesses and nations just don't go out and buy a billion dollar air-o-plane every day. Transportation equipment alone dropped -11.9% in November. Non-defense Aircraft, new orders were only down -53.1% [sic], while defense aircraft new orders increased +7.9%. Computer new orders increased +9.4%, with the general category electronics plus computers new orders increasing 5.8%. Looks like someone out there is buying a lot of new gadgets.

Excluding transportation, new orders increased 2.4%.

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. New orders increased 2.6%. Shipments in core capital goods increased +1.0%. Two things to note, core capital goods has not recovered to 2007 levels but this month from last is an improvement. Not great, but assuredly better than last month, where core capital goods news orders declined -3.6%. Defense capital goods jumped +16.3% in new orders.



Inventories, which also contributes to GDP, were up +0.6% in November 2010 for manufactured durable goods, with transportation inventories increasing +1.3%. Excluding transportation inventories increased +0.3%. Core Capital Goods inventories increased +0.3% in November. Unfilled orders were up 0.4%.

Shipments, which contributes to the investment component of GDP, is down -0.3% in November. Transportation equipment shipments declined -3.3%. Non-defense capital goods shipments decreased -0.6%. In core capital goods, shipments increased 1.0%, in comparison to October's -1.2% drop, this is better news as an approximation and indicator on Q4 2010 GDP growth.

There is a lot of confusion about precisely which shipment metric is a good approximation for the investment component of GDP. It is the total which gives a better feel. The reason? While core capital goods shipment is a good approximation for part of the investment GDP calculation, it sure isn't all.

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. Therefore, we see some good news here with a +1.0% increase in core capital goods shipments, to guesstimate PDE, which is part of the GDP investment component, yet 37.5% is not 100%. Airplanes and autos are also included in PDE and overall shipments are down -0.3% for November.

Here is last month's report, unrevised.

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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