Durable goods orders fall 4% in January

posted at 9:15 am on February 28, 2012 by Ed Morrissey

The first hint of this came in the 2011Q4 GDP report.  While the topline number of 2.8% looked mediocre but not horrid, the figure for growth in real final sales of domestic product — which measures end sales and not inventory adjustments — registered only at 0.8%, barely above recession level.  I noted that this was a red flag for the next quarter and a sign of dropping demand, but today’s report on durable goods was much worse than that indicated:

New orders for manufactured durable goods in January decreased $8.6 billion or 4.0 percent to $206.1 billion, the U.S. Census Bureau announced today.  This decrease, down following three consecutive monthly increases, followed a 3.2 percent December increase.  Excluding transportation, new orders decreased 3.2 percent.  Excluding defense, new orders decreased 4.5 percent.  Transportation equipment, down following two consecutive monthly increases, had the largest decrease, $3.6 billion or 6.1 percent to $55.2 billion. This was due to nondefense aircraft and parts, which decreased $3.8 billion.

Here’s more bad news — even with the drop in demand and orders, inventories continued to rise:

Inventories of manufactured durable goods in January, up twenty-five consecutive months, increased $2.6 billion or 0.7 percent to $372.5 billion.  This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a 0.3 percent December increase.  Machinery, up twenty-two consecutive months, had the largest increase, $0.9 billion or 1.4 percent to $61.4 billion.

Business investment dropped sharply as well, by 6.3% outside of defense:

Nondefense new orders for capital goods in January decreased $5.4 billion or 6.3 percent to $79.5 billion.  Shipments decreased $0.6 billion or 0.9 percent to $70.9 billion.  Unfilled orders increased $8.6 billion or 1.6 percent to $554.4 billion.  Inventories increased $1.7 billion or 1.0 percent to $172.0 billion.  Defense new orders for capital goods in January increased $0.9 billion or 17.7 percent to $5.9 billion.  Shipments decreased $0.3 billion or 3.5 percent to $7.4 billion.  Unfilled orders decreased $1.4 billion or 1.0 percent to $147.2 billion.  Inventories increased $0.1 billion or 0.6 percent to $20.2 billion.

Reuters doesn’t sugar-coat these results, noting that the drop was the worst in three years and four times worse than expected:

New orders for U.S. manufactured goods fell in January by the most in three years as demand fell across the board from machinery to aircraft, suggesting the economy started the year on weaker footing than expected.

Durable goods orders dropped 4.0 percent, the biggest drop since January 2009 when the country was still mired in a deep recession, according to Commerce Department data on Tuesday.

Economists had forecast orders falling 1.0 percent.

This takes place at the worst possible time for the US, and especially for the Obama administration.  Rising gas prices will have an inflationary effect on most goods brought to market, especially on produce and other food items, which rely on ground transportation for distribution.  That will erode disposable income and have households pinching pennies.  Businesses will also have to cut back their spending even further as gas prices rise in order to avoid hiking prices on their own goods and services.  As a result, demand will drop off sharply in the next few months, which means we may be waiting a very long time for durable-goods orders to rebound.


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Comment pages: 1 2

Worst report in over 3 years? Worst President in over 236 years. What a coincidence.

Bmore on February 28, 2012 at 10:40 AM

Maybe if Mittens bought three more caddies it would be different.

Fuquay Steve on February 28, 2012 at 10:43 AM

Great details. They project what is to come. And the economy is about to take a dive. Poor Barry – his policies are coming home to roost. But the hell of it is some of those who create raw materials and others who utilizes them, are voting for the same guy who escalated the causes.

democratsarefools on February 28, 2012 at 10:53 AM

As of 10:30 am DJIA up 30 points. Sorry to disaapoint. We know you’re rooting for bad economic news for America.

plewis on February 28, 2012 at 10:54 AM

I heard on FOX this morning that the economy was such great news today. The consumer index was way up. I really think people are getting tired of hearing how great things are when their “lyin eyes” tell them defferently.

AnnaS on February 28, 2012 at 10:55 AM

plewis on February 28, 2012 at 10:54 AM

Well, that proves these numbers more…um…just what is your point, chumplett?

MNHawk on February 28, 2012 at 10:58 AM

As of 10:30 am DJIA up 30 points. Sorry to disaapoint. We know you’re rooting for bad economic news for America.

plewis on February 28, 2012 at 10:54 AM

Connect the dow to the economy on main street.
Thanks.

Mimzey on February 28, 2012 at 10:58 AM

As of 10:30 am DJIA up 30 points. Sorry to disaapoint. We know you’re rooting for bad economic news for America.

plewis on February 28, 2012 at 10:54 AM

Are you one of those vile 1-perecenters?

Deafdog on February 28, 2012 at 10:59 AM

The general public could care less about durable goods. The only numbers that matter are the jobs numbers and consumer confidence.

gumbyandpokey on February 28, 2012 at 11:00 AM

As of 10:30 am DJIA up 30 points. Sorry to disaapoint. We know you’re rooting for bad economic news for America.

plewis on February 28, 2012 at 10:54 AM
Connect the dow to the economy on main street.
Thanks.

Mimzey on February 28, 2012 at 10:58 AM

Umm, no. inflation

WryTrvllr on February 28, 2012 at 11:03 AM

Even pantcreasers fell!

Chuck Schick on February 28, 2012 at 11:06 AM

The general public could care less about durable goods. The only numbers that matter are the jobs numbers and consumer confidence.

gumbyandpokey on February 28, 2012 at 11:00 AM

Mostly true, but maybe not so relevant…

Durable goods is a ‘leading’ indicator – it gives a clue on the future direction of economic activity.

jobs numbers and consumer confidence are lagging indicators – they give a clue on past economic activity.

To the extent that durable goods (a leading indicator) may give a clue on how jobs and confidence will be in the future (since they lag), the general public should care. They will care when jobs don’t materialize.

Deafdog on February 28, 2012 at 11:11 AM

I live near Atlanta and I dont know anyone who isnt extremely worried and being very careful with expenditures. The bottom line is we have less disposable income than we did a year ago. With gas prices going up and food prices going up I dont see that changing. They can say the economy is improving but if people arent seeing that in their wallets then they arent going to believe it. Who trusts what the gov or the media say? I also have heard people worrying more about the middleeast recently. There is so much uneasyness out there. Just wishing Repubs would start calling Obama out and get their acts together.

ldbgcoleman on February 28, 2012 at 11:14 AM

Anyone who says the economy is proving is either an idiot or a liar. Month to month changes, whether up or down does not detract from the reality the economy is stuck. There is not a lot of hiring and people are not buying. Businesses may have been investing to replace old machinery – think of how long computers stay up to date – but are not investing to expand. Stores are closing, housing prices are falling, that is reality not some bizarre desire to see the economy sink.

Smedley on February 28, 2012 at 11:15 AM

Ed – surprisingly, you forgot to add the most Key word in your article and headline:

“UNEXPECTEDLY”
……really, you should echo the Mainstream Media Echo Chamber narrative….

williamg on February 28, 2012 at 11:22 AM

Reality bites if you live in CT.

WryTrvllr on February 28, 2012 at 9:58 AM

Not really-after all there are 3, count ‘em 3, NASCAR Races in CT on back-to-back-to-back weekends in April. Ken and the Ball and Chain got a luxury box for all 3 races.

Del Dolemonte on February 28, 2012 at 11:24 AM

Not really-after all there are 3, count ‘em 3, NASCAR Races in CT on back-to-back-to-back weekends in April. Ken and the Ball and Chain got a luxury box for all 3 races.

Del Dolemonte on February 28, 2012 at 11:24 AM

Yes, but are they behind the barriers and in the shade?

WryTrvllr on February 28, 2012 at 11:29 AM

We know you’re rooting for bad economic news for America.

plewis on February 28, 2012 at 10:54 AM

No, your Democrats did that in 2006, when they made it an actual campaign policy to talk down the economy solely to get elected to Congress.

Democrats on Capitol Hill made clear their plans to make a political issue out of the escalating prices. House Minority Leader Nancy Pelosi of California will hold a press conference today to call on the administration to “stop price gouging.”

Senate Minority Leader Harry Reid of Nevada said the price of gasoline has risen 100 percent since Mr. Bush first was elected.

F-

Del Dolemonte on February 28, 2012 at 11:30 AM

Of course all the network morning shows and evening news will lead with this story because it hurts Obama’s election chances…..psyche! If they mention it at all, it’ll be a one sentence blip and somehow they’ll blame Bush.

OxyCon on February 28, 2012 at 11:56 AM

The worst is yet to come. With the easy money and the bailouts and the QE’s, inflation is on its way. It’s just a matter of time. You are seeing it first in the oil prices which are dealt in Dollars. As the dollar falls, oil goes up. The increase in oil will lead to just about everything else going up as well. What did these idiots expect? Elect a bumbling moron and this is what you get. I don’t have to worry for myself, but for the younger workers just getting started.

rjulio on February 28, 2012 at 11:56 AM

Here’s more bad news — even with the drop in demand and orders, inventories continued to rise…

Business investment dropped sharply as well, by 6.3% outside of defense…

Reuters doesn’t sugar-coat these results, noting that the drop was the worst in three years and four times worse than expected…

This takes place at the worst possible time for the US, and especially for the Obama administration. Rising gas prices will have an inflationary effect on most goods brought to market, especially on produce and other food items, which rely on ground transportation for distribution. That will erode disposable income and have households pinching pennies. Businesses will also have to cut back their spending even further as gas prices rise in order to avoid hiking prices on their own goods and services. As a result, demand will drop off sharply in the next few months, which means we may be waiting a very long time for durable-goods orders to rebound.

Pretty grim, isn’t it?

And we’re already down 12.5 Million jobs from where we were 5 years ago, when the balance of power shifted from Republican to Democrat.

Expect the Democratic spin cycle to do their best to “Hide the decline”.

Anyone up for:
Recovery Summer, Part III“?

ITguy on February 28, 2012 at 12:28 PM

Bad economic news. YAY!!!!! (“conservatives”)

Seven Seas on February 28, 2012 at 12:36 PM

The worst is yet to come. With the easy money and the bailouts and the QE’s, inflation is on its way. It’s just a matter of time.

Based on the cost of everything I buy, inflation is already here. I do not believe the govt. inflation stats.

Deafdog on February 28, 2012 at 12:42 PM

As of 10:30 am DJIA up 30 points. Sorry to disaapoint. We know you’re rooting for bad economic news for America.

plewis on February 28, 2012 at 10:54 AM

Why do you liberal crony capitalists love Wall Street more than Main Street?

Chuck Schick on February 28, 2012 at 12:43 PM

Bad economic news. YAY!!!!! (“conservatives”)

Seven Seas on February 28, 2012 at 12:36 PM

….you again!
Go reincarnate yourself!

KOOLAID2 on February 28, 2012 at 12:44 PM

Nope … we’re all awaiting the new shipment of Do-It-Yourself Algae Farms.

Lost in Jersey on February 28, 2012 at 9:29 AM

You’d probably need a haz-mat license from the gubmint. And 12 other federally-mandated certifications.

disa on February 28, 2012 at 10:01 AM

I plan to eliminate the red tape by planting my algae seeds in

these.

Barnestormer on February 28, 2012 at 12:49 PM

Bad news? How can this be? I thought America was all up-twinkles or something.

swinia sutki on February 28, 2012 at 1:01 PM

As of 10:30 am DJIA up 30 points. Sorry to disaapoint. We know you’re rooting for bad economic news for America.

plewis on February 28, 2012 at 10:54 AM

Wow. Low quality trolls on HA? Jeepers. This person cannot spell or form proper sentences. They have logic issues also.

Everyone knows the economic stats put out by the Zero Campaign are all as phony as the CRU climate data. No one is rooting for bad news. Eacg piece of it that we see is a painful reminder of just how poorly our current occupant of the White House performs his job.

Since you see this as bad news, plewis, it seems you know it also.

We’ve all known he was a loser for over three years. I guess you’re just starting to see it.

dogsoldier on February 28, 2012 at 1:14 PM

Eacg should read Each

dogsoldier on February 28, 2012 at 1:14 PM

The one and only campaign tag line that will kill Presidebt 0bama’s reelection?

Are you better off now than you were four years ago?

jukin3 on February 28, 2012 at 1:38 PM

Are you better off now than you were four years ago?

jukin3 on February 28, 2012 at 1:38 PM

He and the zombie posse will look you in the eye and tell you that you are better off. Just like plewis there. We are in a depression and he makes it worse every time he opens his mouth.

btw the price of gas jumped another 10 cents a gallon here this week. Premium is over $4. And yeah thats on Zero too, plewis.

dogsoldier on February 28, 2012 at 1:48 PM

Bad economic news. YAY!!!!! (“conservatives”)

Seven Seas on February 28, 2012 at 12:36 PM

We’ve had nothing but bad economic news since President 10-289 took office.

Good news coming in November.

MichaelGabriel on February 28, 2012 at 2:21 PM

Bad economic news. YAY!!!!! (“conservatives”)

Seven Seas on February 28, 2012 at 12:36 PM

As of 10:30 am DJIA up 30 points. Sorry to disaapoint. We know you’re rooting for bad economic news for America.

plewis on February 28, 2012 at 10:54 AM

This is going to be the garbage narrative from the communists this election?

You people are pathetic.

tom daschle concerned on February 28, 2012 at 2:28 PM

As of 10:30 am DJIA up 30 points. Sorry to disaapoint. We know you’re rooting for bad economic news for America.

Really?!

It’s more like this:

When life gives you lemons…a lousy economy….

Make lemonade…get rid of hte incompetent in the White House that failed to fix the problem.

MichaelGabriel on February 28, 2012 at 2:58 PM

Not a good report, but the markets appear to be taking it in stride. Much of the drop appears to be in aircraft orders (down 19%). Meanwhile, the consumer confidence was good, and this may be the day we finally close above 13K. GDP number tomorrow will be interesting, as will the employment numbers on Friday.

TouchdownBuddha on February 28, 2012 at 3:29 PM

Brace yourselves, Boys and Girls!! It’s going to get nasty going forward!! Barry and Sheriff Joe will will keep throwin’ those buffalo chips about how wonderfully the country is turning around.
Ask yourselves America: Can we really afford four more years of LIES???

Colatteral Damage on February 28, 2012 at 4:20 PM

Maybe if Mittens bought three more caddies it would be different.

Right. Because it’s not the president’s fault, it’s the fault of the guy who’s trying to be the next president.

You gotta love those zero supporters — they just can’t EVER understand.

Dirty Creature on February 28, 2012 at 6:27 PM

We know you’re rooting for bad economic news for America.

ANOTHER zero supporter. It’s not what zero is doing, it’s what the out party is “rooting for” that matters.

Makes you wonder what they think presidents are for, anyway.

Dirty Creature on February 28, 2012 at 6:33 PM

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