CNBC: Big miss on durable goods no “statistical fluke”

posted at 4:51 pm on August 26, 2013 by Ed Morrissey

Our guest blogger covering Allahpundit’s vacation and my state-fair broadcasting schedule, QandO’s Bruce McQuain, already addressed the problems that create and extend economic stagnation.  This morning’s big economic indicator shows that we can expect it to extend even further — or perhaps get worse.  The durable goods report for July showed a 7.3% decline in output, the worst in several years, and it’s not just limited to a hiccup in reporting:

New Orders. New orders for manufactured durable goods in July decreased $17.8 billion or 7.3 percent to $226.6 billion, the U.S. Census Bureau announced today. This decrease, down following three consecutive monthly increases and followed a 3.9 percent June increase. Excluding transportation, new orders decreased 0.6 percent. Excluding defense, new orders decreased 6.7 percent. Transportation equipment, also down following three consecutive monthly increases, led the decrease, $16.7 billion or 19.4 percent to $69.7 billion. This was led by nondefense aircraft and parts, which decreased $14.5 billion.

Shipments also fell 0.3%, led this time by computers and electronic products, which dropped 3.2%, as inventories increased by 0.4%.  The transportation numbers were mainly driven by a drop in commercial aircraft, which is a particularly volatile category — but even that doesn’t entirely explain the sudden reversal. The drop in computer and electronics tracks with a big drop in capital goods (also impacted by transportation), which is an indicator of business investment in future business growth.  At least in July, businesses bet the other way.

CNBC’s Bob Pisani warns that readers shouldn’t just write this off as a statistical fluke, and that this will undoubtedly influence the Fed’s short-term policies:

Even the much-parsed ex-transportation figure came in far below expectations with a 6.7 percent plunge. Excluding defense and air, the core number was down 3.3 percent, after four consecutive up months.

You can’t even blame it on seasonality or some statistical fluke. This was the most high profile data point this week, and the result greatly complicates the taper talk.

The pressure is really on the nonfarm payroll report for August, due next week. You really need a strong number for the Fed to even flirt with scaling back its bond purchases in September. Consensus for nonfarm payrolls is around 166,000, but that number needs to be really strong —arguably over 200,000.

The U.S. Treasury 10-year yield dropped about 3 basis points on that news, to 2.79 percent. This is the second day in a row the 10-year has dropped, following Friday’s disappointing July New home sales report.

Last Friday, two regional Fed presidents openly bickered about whether the time had come for the Fed to start decreasing its bond purchases and withdraw that influence on the economy. Atlanta Fed president Dennis Lockhart argued that recent figures showed that the economy was on a “moderate growth path,” which this report refutes rather loudly.

This big drop suddenly makes the report on July job growth at the end of next week a lot more interesting.  Employment lags shifts in growth, though, and one month of bad reports isn’t usually enough to frighten off expansion.  This can be a chicken-egg argument, however, and it seems that businesses made a decision not to invest in growth at least for one month, and that may well be reflected in the next monthly jobs report.


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Allahpundit’s vacationCatcation

More accurate.

nobar on August 26, 2013 at 4:56 PM

The administration and the media having been glossing over the country’s real situation for five years, is honesty going to come in time to change the course with the upcoming election? And if so, will Republicans stop acting like Dem Lite?

Cindy Munford on August 26, 2013 at 5:01 PM

it seems that businesses made a decision not to invest in growth at least for one month, and that may well be reflected in the next monthly jobs report.

What with all the scandals for which nobody is held accountable, a President running amok and ignoring the rule of law, a Department of (in)Justice which clearly is not doing its job, a lousy economy, the looming Obamacare…….. etc.

I’m beginning to think just how I can cut my losses in this nation. The US I thought I was investing in no longer exists and I want nothing to do with the socialist one being driven forward by the left and establishment Republicans which start any debate on the above issues with “to be fair.”

Happy Nomad on August 26, 2013 at 5:04 PM

I blame the rodeo clown.

rob verdi on August 26, 2013 at 5:06 PM

The administration and the media having been glossing over the country’s real situation for five years, is honesty going to come in time to change the course with the upcoming election? And if so, will Republicans stop acting like Dem Lite?

Cindy Munford on August 26, 2013 at 5:01 PM

Whether or not it happens before the 2014 elections, the chickens are going to come home to roost at some point. For the Dems still out there defending this administration and all its crimes against the American people, it is like playing Russian Roulette.

Happy Nomad on August 26, 2013 at 5:07 PM

This big drop suddenly makes the report on July job growth at the end of next week a lot more interesting. Employment lags shifts in growth, though, and one month of bad reports isn’t usually enough to frighten off expansion.

ZeroCare and Amnesty will completely wreck the economy.

dogsoldier on August 26, 2013 at 5:08 PM

The Fed will keep the pump going because the economy sucks, therefore the stock market will rise, and the Media will trumpet how awesome the economy is because of the stock market. Yay Obama!

BuzzCrutcher on August 26, 2013 at 5:10 PM

I’m not sure that this news even penetrates the minds of the vast number of our citizenry.

Cindy Munford on August 26, 2013 at 5:13 PM

Obama doesn’t care, he can’t see how it helps him redistribute wealth.

Tater Salad on August 26, 2013 at 5:20 PM

Obama doesn’t care, he can’t see how it helps him redistribute wealth.

Tater Salad on August 26, 2013 at 5:20 PM

I misspoke! On second thought if he can call for a new government plan to raise taxes and give it to his desired recipients, then he would pay attention.

Tater Salad on August 26, 2013 at 5:23 PM

Un
Ex
Pect
Ed
Ly

/we didn’t see this coming

Paul-Cincy on August 26, 2013 at 5:25 PM

The amount of drag on the economy due to PPACA could not even be overcome if the Fed was paying us to borrow money.

Another Drew on August 26, 2013 at 5:31 PM

The administration and the media having been glossing over the country’s real situation for five years, is honesty going to come in time to change the course with the upcoming election? And if so, will Republicans stop acting like Dem Lite?

Cindy Munford on August 26, 2013 at 5:01 PM

Sadly Mrs. Munford, Nevah gonna happen.

I’m still impressed with the way Romney/Ryan kicked butt.

arnold ziffel on August 26, 2013 at 5:45 PM

This big drop suddenly makes the report on July August job growth at the end of next week a lot more interesting.

Just correcting the heat-induced typo, though July’s (and June’s) jobs numbers will be revised at the end of next week as well. I’m expecting a thumbs-down performance even though the automotive sector has been herocially increasing (+0.7% in shipments on a seasonally-adjusted basis, +0.5% in new orders, and widely credited in keeping initial jobless claims below 350K the last few weeks as auto plants either didn’t shut down or had their annual shut downs staggered over a longer period).

Steve Eggleston on August 26, 2013 at 5:58 PM

Wait until BoehnerCare kicks in next January!!

Slowdown?……you’ll wish!!

PappyD61 on August 26, 2013 at 6:05 PM

This means QE forever…

blue13326 on August 26, 2013 at 6:19 PM

And if so, will Republicans stop acting like Dem Lite?

Cindy Munford on August 26, 2013 at 5:01 PM

..it’s too bad these clowns can’t read the tea leaves. There is a perfect storm building what with the scandals and an uptick in the ugly mood of a lot of Americans.

Talking about squandering a great opportunity to send the socialists, commies, and idiots packing for all time!

The War Planner on August 26, 2013 at 6:22 PM

My company manufactures durable goods (furniture) and we spend $25,000+ per month buying Google ads for a wide variety of products. In June, searches (not clicks mind you, but just people searching for one of several hundred key phrases we buy) were down 26% year-over-year. In July searches were down 40%. The search volume is a good indicator of consumer interests, and while it can go down due to low interest in a particular product, that is not the case in a very broad set of products. It is actually a really stunning decline that has nothing to do with our business, how much we advertise or our products. It’s simply the number of times people search for terms in one month.

The last time I saw these types of numbers was in June and July of 2008, just before the bottom fell out of everything. Frankly, it scares the hell out of me that we may be heading there again. The last recession knocked us on our ass, but I fear this one may finish us off for good.

ReaganWasRight on August 26, 2013 at 6:37 PM

Statistics are racist.

Ellis on August 26, 2013 at 8:09 PM