Durable goods orders fall 4.3% in December … “unexpectedly”

posted at 10:01 am on January 28, 2014 by Ed Morrissey

Economic growth in the third quarter ended up at 4.1%, due in large part to inventory expansion, which provided about 1.7 points to that figure. At the time, I wrote that business may have been betting big on Q4 growth and stocking up for a real boost.  Today’s durable-goods report from December shows that either the bet didn’t pay off or businesses have lost confidence in it:

New orders for manufactured durable goods in December decreased $10.3 billion or 4.3 percent to $229.3 billion, the U.S. Census Bureau announced today. This decrease, down two of the last three months, followed a 2.6 percent November increase. Excluding transportation, new orders decreased 1.6 percent. Excluding defense, new orders decreased 3.7 percent. Transportation equipment, also down two of the last three months, led the decrease, $7.7 billion or 9.5 percent to $73.1 billion. This was led by nondefense aircraft and parts, which decreased $3.8 billion.

In other words, this is an across-the-board decline. Inventories also expanded significantly, which will put downward pressure on future orders and manufacturing, and in fact hit a new high:

Inventories of manufactured durable goods in December, up eight of the last nine months, increased $3.0 billion or 0.8 percent to $387.8 billion. This was at the highest level since the series was first published on a NAICS basis, and followed a 0.3 percent November increase. Transportation equipment, up nineteen of the last twenty months, led the increase, $1.3 billion or 1.1 percent to $122.1 billion.

Capital goods, which provides an indicator of business investment and confidence, also fell across the board:

Nondefense new orders for capital goods in December decreased $4.3 billion or 5.0 percent to $82.5 billion. Shipments increased $0.6 billion or 0.8 percent to $75.4 billion. Unfilled orders increased $7.1 billion or 1.1 percent to $642.7 billion. Inventories increased $1.2 billion or 0.7 percent to $176.7 billion. Defense new orders for capital goods in December decreased $1.9 billion or 21.5 percent to $6.8 billion. Shipments decreased $1.3 billion or 11.5 percent to $9.6 billion. Unfilled orders decreased $2.8 billion or 1.7 percent to $161.9 billion. Inventories increased $0.5 billion or 2.1 percent to $22.9 billion.

Give credit to the Associated Press for not using the word “unexpected,” though Martin Crutsinger notes that it was “a surprise to economists“:

Businesses cut back sharply on their orders for long-lasting manufactured goods in December with a key category that signals business investment plans falling by the biggest amount in five months. …

There was widespread weakness in a number of categories including a 1.3 percent decline in demand for non-defense capital goods excluding aircraft. This category is viewed as a proxy for business investment plans.

Some of the December weakness probably reflected a temporary dip following November’s big jump which had been driven by businesses rushing to take advantage of expiring tax breaks.

The December decline came as a surprise to economists. The consensus view among economists was that orders would post a moderate rise reflecting what they believe is an improving outlook for U.S. manufacturers.

Reuters, however, used the U-word in both its headline and its lead:

Orders for long-lasting U.S. manufactured goods unexpectedly fell in December as did a gauge of planned business spending on capital goods, which could cast a shadow on an otherwise bright economic outlook. …

The report puts a wrinkle on the economy’s outlook, which had been bolstered by upbeat data on consumer spending and industrial production.

“We had been on a run of pretty uniform upside surprises, and the data lately have been a bit more mixed, so some of that very strong momentum that we saw at the end of the year is cooling off a little bit,” said Julia Coronado, chief North America economist at BNP Paribas in New York.

The report came as officials from the Federal Reserve were due to start a two-day policy meeting.

The big question will be whether the Fed delays its taper moves, or acts to continue its stimulus. Yesterday, Crutsinger reported that the Fed was likely to cut back its quantitative easing path by another $10 billion a month. Will this change minds at the Fed tomorrow?

Update: Fixed the subhead from “farthest” (a measure of actual physical distance) to “furthest.” Thanks to Herm2416 in the comments for the correction.


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EeeeeeeeD! furthest! It is FURTHEST, not farthest….fix your headline, please! Furthest is an immeasurable (by yardstick) distance!!

Yes, I freely admit it, I’m a stickler for furthest/farthest! : )

herm2416 on January 28, 2014 at 10:04 AM

The big question will be whether the

……..Preezy will have any comment about this tonight?

herm2416 on January 28, 2014 at 10:06 AM

Don’t worry, the economy will save the Dems.

NotCoach on January 28, 2014 at 10:06 AM

They will rise in January — my old furnace died two weeks ago, had to have it replaced. Selling the last of my stocks to pay for it and for the dog who’s at the vet right now for dental reasons.

rbj on January 28, 2014 at 10:09 AM

Don’t worry, the economy will save the Dems.

NotCoach on January 28, 2014 at 10:06 AM

That and the Dems will be proudly running on Obamacare by November.

Happy Nomad on January 28, 2014 at 10:09 AM

OMG! Hurry up and print more money!

forest on January 28, 2014 at 10:10 AM

The big question will be whether the

……..Preezy will have any comment about this tonight?

herm2416 on January 28, 2014 at 10:06 AM

The economy is going gangbusters but not good enough.

Happy Nomad on January 28, 2014 at 10:10 AM

The big question will be whether the Fed delays its taper moves, or acts to continue its stimulus. Yesterday, Crutsinger reported that the Fed was likely to cut back its quantitative easing path by another $10 billion a month. Will this change minds at the Fed tomorrow?

Janet Yellen left holding the bag as Bernanke scuttles out the the hole in the glass ceiling…another milestone in Women’s rights.

kcewa on January 28, 2014 at 10:15 AM

************* Hopeys Economy Black-Hole, er, Abyss ***********************!!

canopfor on January 28, 2014 at 10:15 AM

EeeeeeeeD! furthest! It is FURTHEST, not farthest….fix your headline, please! Furthest is an immeasurable (by yardstick) distance!!

Yes, I freely admit it, I’m a stickler for furthest/farthest! : )

herm2416 on January 28, 2014 at 10:04 AM

Obligatory

Shy Guy on January 28, 2014 at 10:16 AM

Hmmmm, …

The Associated Press ‏@AP 8m

BREAKING: U.S. consumer confidence climbs to 80.7 in January, the strongest reading in 5 months.

canopfor on January 28, 2014 at 10:17 AM

Just wait till Obama correlates this negative report with the weather.

Murphy9 on January 28, 2014 at 10:18 AM

POLITICO ‏@politico 6m

WATCH LIVE: @SpeakerBoehner, House GOP hold presser http://politi.co/9Ax31v
View summary
================

http://www.politico.com/livestream/

canopfor on January 28, 2014 at 10:20 AM

EeeeeeeeD! furthest! It is FURTHEST, not farthest….fix your headline, please! Furthest is an immeasurable (by yardstick) distance!!

Yes, I freely admit it, I’m a stickler for furthest/farthest! : )

herm2416 on January 28, 2014 at 10:04 AM

Business investment drops is largest farthest in five months.

Measure of quantity not distance…

kcewa on January 28, 2014 at 10:23 AM

Valerie Jarrett is no doubt at this very moment calling businesses to exact pledges to order more.

With such a long phone list, she may have to go the robocall route.

Drained Brain on January 28, 2014 at 10:29 AM

The Hon. Jon S. Corzine was reported to be highly excited when he heard the report. He issued the following statement. This reaffirms the confidence the American people have in the Obama team. If this trend continues I may reopen MF Global. Please remember the stock market is a true indicator of the American economy. Helping one little investor at a time.
If anyone has doubts they need to watch tonight at 9PM. “Happy Days are here again.”

RickinNH on January 28, 2014 at 10:32 AM

The December decline came as a surprise to economists.

Any economist that is surprised by any bad news in an Obama economy should probably look for other work.

Inventories of manufactured durable goods in December, up eight of the last nine months, increased $3.0 billion or 0.8 percent to $387.8 billion.

Maybe the Fed can get into a new line of economic stimulus programs by taking a day off from buying Treasuries to buying up some of this extra inventory. They could set up a stand at a flea market in China and sell stuff at cents on the dollar – whatever that is worth right now in the global economy.

DaveDief on January 28, 2014 at 10:34 AM

And the stock market has unexpectedly dropped 600 points in the last five days, but you won’t hear this in the media.

Rovin on January 28, 2014 at 10:35 AM

And the stock market has unexpectedly dropped 600 points in the last five days, but you won’t hear this in the media.

Rovin on January 28, 2014 at 10:35 AM

The bias of the media has become almost comical. During the Bush years they did nothing but bemoan the “bad” economy. Now that we have a never ending recession, and a major contraction of the workforce, they do nothing but talk about the never ending “recovery”. I would bet any amount of money that if Romney were president right now they would be harping on the negatives morning, noon, and night.

NotCoach on January 28, 2014 at 10:42 AM

Rovin on January 28, 2014 at 10:35 AM
and you certainly won’t hear about it in the SOTU because as Obots already know, the economy is great, we are in recovery and Barry is shifting his focus to jobs (right after dictating a raise in federal contract minimum wage, amnesty and other economic killing measures).

katablog.com on January 28, 2014 at 10:42 AM

SpeakerBoehner, House GOP hold presser

canopfor on January 28, 2014 at 10:20 AM

What could possibly go wrong?

Happy Nomad on January 28, 2014 at 10:43 AM

consumer confidence is a lagging indicator.

Durable goods orders are a legal one.

Pretty funny if the dems have to run their campaigns in the teeth of another recession. No one wants to say it, but it looks like it’s on the way.

Tom Servo on January 28, 2014 at 10:45 AM

As long as we’re talking about language, I dislike “unexpectedly” because it isn’t clear who thinks the event is unexpected. I assume it’s economic forecasters, but I’m not certain.

That said, most readers aren’t so fastidious., so I don’t know why “unexpectedly” sticks in Ed’s craw.

Certainly we see economic news being handled with political prejudice again and again by the NYT, et al, especially in their headlines.

But in this case I don’t see the problem. The economy HAS been improving, the business community didn’t expect a decline in orders, hence “unexpectedly.” There doesn’t seem to be much difference between that and “a surprise for economists.”

bobs1196 on January 28, 2014 at 10:46 AM

As long as we’re talking about language, I dislike “unexpectedly” because it isn’t clear who thinks the event is unexpected. I assume it’s economic forecasters, but I’m not certain.

That said, most readers aren’t so fastidious., so I don’t know why “unexpectedly” sticks in Ed’s craw.

Certainly we see economic news being handled with political prejudice again and again by the NYT, et al, especially in their headlines.

But in this case I don’t see the problem. The economy HAS been improving, the business community didn’t expect a decline in orders, hence “unexpectedly.” There doesn’t seem to be much difference between that and “a surprise for economists.”

bobs1196 on January 28, 2014 at 10:46 AM

DOW 20,000!

Murphy9 on January 28, 2014 at 10:49 AM

bobs1196 on January 28, 2014 at 10:46 AM

“Unexpectedly” was used in almost all economic reports from the LSM during 2009-2010. It became comical.

nobar on January 28, 2014 at 10:54 AM

canopfor on January 28, 2014 at 10:20 AM

What could possibly go wrong?

Happy Nomad on January 28, 2014 at 10:43 AM

Happy Nomad:..Lol:0

canopfor on January 28, 2014 at 11:01 AM

Obligatory

Shy Guy on January 28, 2014 at 10:16 AM

LOLOLOL! Well done!

Business investment drops is largest farthest in five months.

Measure of quantity not distance…

kcewa on January 28, 2014 at 10:23 AM

Wooooo, good point! I was just using Ed’s word though.

herm2416 on January 28, 2014 at 11:14 AM

Either/or?

My prediction for the first revision of 4th quarter GDP is -0.5 percentage points to +2.2% (which makes my prediction for Thursday’s preliminary look +2.8%).

Steve Eggleston on January 28, 2014 at 11:15 AM

Not weather-related? That’s a surprise.

BKeyser on January 28, 2014 at 11:19 AM

A three point plan for pivoting to the economy:

1. Make employees more expensive with minimum wage hikes and Obama Care.

2. Ease our social safety net by granting 50 million illegal aliens legal status.

3. Make energy even more expensive.

jukin3 on January 28, 2014 at 11:23 AM

Economic BOOOOOOOOOM!

Chris of Rights on January 28, 2014 at 11:42 AM

In the screencap on the home page, see that metallic thing the “president” is standing behind?

It looks like a gigantic screw.

I like the symbolism. Very appropriate.

FlameWarrior on January 28, 2014 at 11:46 AM

New orders for manufactured durable goods in December decreased $10.3 billion or 4.3 percent to $229.3 billion, the U.S. Census Bureau announced today.

Why is the Census Bureau tracking manufactured durable goods? Why isn’t the Bureau of manufactured durable goods tracking it? If there is no Bureau of Manufactured Durable Goods, why isn’t Obama creating a Bureau of Manufactured Durable Goods? He does have a pen, doesn’t he?

timberline on January 28, 2014 at 11:54 AM

They will rise in January — my old furnace died two weeks ago, had to have it replaced. Selling the last of my stocks to pay for it and for the dog who’s at the vet right now for dental reasons.

rbj on January 28, 2014 at 10:09 AM

My Airbus 300 just ran out of gas and the ash trays are full. Looks like I’ll have to order me up another 300…and maybe a Boeing 787 as a backup.

timberline on January 28, 2014 at 11:57 AM

Let’s continue to blame SUPERSTORM SANDY!

kpguru on January 28, 2014 at 12:07 PM

…p i v o t !

KOOLAID2 on January 28, 2014 at 12:14 PM

They will rise in January — my old furnace died two weeks ago, had to have it replaced. Selling the last of my stocks to pay for it and for the dog who’s at the vet right now for dental reasons.

rbj on January 28, 2014 at 10:09 AM

Well, yes, with the denominator as dismal as it is…….

WryTrvllr on January 28, 2014 at 1:58 PM

As long as we’re talking about language, I dislike “unexpectedly” because it isn’t clear who thinks the event is unexpected. I assume it’s economic forecasters, but I’m not certain.

That said, most readers aren’t so fastidious., so I don’t know why “unexpectedly” sticks in Ed’s craw.

Certainly we see economic news being handled with political prejudice again and again by the NYT, et al, especially in their headlines.

But in this case I don’t see the problem. The economy HAS been improving, the business community didn’t expect a decline in orders, hence “unexpectedly.” There doesn’t seem to be much difference between that and “a surprise for economists.”

bobs1196 on January 28, 2014 at 10:46 AM

Watch globally, expect locally.

WryTrvllr on January 28, 2014 at 2:09 PM

Economic KA-BOOOOOOOOOM!

Chris of Rights on January 28, 2014 at 11:42 AM

ReWrite™ engaged by the official cereal of AoSHQ Morons.

Steve Eggleston on January 28, 2014 at 2:46 PM

Durable goods orders fall 4.3% in December … “unexpectedly”

No $hit…millions can’t afford to buy new stuff and businesses are closing down left and right.

Dr. ZhivBlago on January 28, 2014 at 3:21 PM

EeeeeeeeD! furthest! It is FURTHEST, not farthest….fix your headline, please! Furthest is an immeasurable (by yardstick) distance!!

Yes, I freely admit it, I’m a stickler for furthest/farthest! : )

herm2416 on January 28, 2014 at 10:04 AM

I started hearing the “anything further father” routine that Groucho and Zeppo do in Horsefeathers. And how many of you remember that the football game was between Darwin and Huxley?

Fafhrd on January 28, 2014 at 5:38 PM

Tech corporations were under politically-motivated pressure to increase inventory during 2013-Q4 in spite of clearly falling demand. It seems that other nations have learned the U.S. liberal’s trick of making “economic indicators” appear positive to artificially lift consumer confidence.

But the worm is turning. High tempo sectors who operate on massive volume and minimal margin have been suffering since well before Christmas, and there is no way they can push the current inventory into the marketplace, as the consumers are either already saturated with the existing goods, and will now expect newer/better products, or else real demand is simply non-existent. Either way, it means huge costs with no returns.

Look for the major players to begin layoffs within the next six weeks, the small fish to get eaten by the large, and all of the other markers of a major contraction.

Wall St. has been climbing a mountain of nothing, and it’s about to make like Thelma’s T-Bird.

Freelancer on January 29, 2014 at 12:52 PM