Wednesday, May 25, 2011

Durable Disappointment

Kudos to Tyler Durden at Zero Hedge:

At this point there is no need to even highlight the stagflationary crunch the US economy has entered, although the just released Durable Goods number seals the deal: -3.6% on expectations of -2.5%, an 8% revised swing M/M! Ex transportation -1.5% with consensus of +0.5% (down from 1.3%). Q2 GDP now trending sub 2%. Absent the BOJ flooding the market with trillions of fresh Yen, QE3 is now inevitable.
From the report:

New orders for manufactured durable goods in April decreased $7.1 billion or 3.6 percent to $189.9 billion, the U.S. Census Bureau announced today. This decrease, down two of the last three months, followed a 4.4 percent March increase. Excluding transportation, new orders decreased 1.5 percent. Excluding defense, new orders decreased 3.6 percent. Transportation equipment, also down two of the last three months, had the largest  decrease, $4.9 billion or 9.5 percent to $46.7 billion.
This even with the now default increase in inventories (which will be liquidated eventually: thank you FIFO/LIFO).
Inventories of manufactured durable goods in April, up sixteen consecutive months, increased $3.2 billion or 0.9 percent to $350.5 billion. This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a 1.7 percent March increase. Transportation equipment, also up sixteen consecutive months, had the largest increase, $1.0 billion or 1.0 percent to $106.1 billion. This was also at the highest level since the series was first published on a NAICS basis in 1992 and followed a 2.4 percent March increase.
From SMRA:
April new durable goods orders were reported down 3.6%, following a revision higher to up 4.4% in March (previously +4.1%). This was near our forecast for down 3.5%. Expectations in a Bloomberg survey centered at a 2.5% decrease. The range was from down 5.7% to up 2.0%. While the decrease is fairly substantial, it needs to be taken in context with supply chain disruptions that had an impact on new orders for a variety of manufactured goods, but particularly for the manufacture of motor vehicles. Also, new orders typically seesaw between up and down months, and this appears to be the case for April.

Transportation orders fell 9.5% in April. Orders for motor vehicles and parts were down 4.5%, and civilian aircraft orders dropped 30.0%. Boeing had a scant two new orders in the month. However, as we noted in our Chart of the Day on May 6, it is not unusual for the number of orders for aircraft to be low in the months in advance of an airshow, and then jump in the week of the show and for a few weeks afterward. The last major airshow was at Farnborough in July 2010, so there may be some pent-up demand to which to look forward.
And so forth. There is no way to spin the data. In other news, the Japanese earthquake may after all end up not being beneficial to global GDP.