Durable goods, business investment drop …

posted at 11:01 am on March 25, 2015 by Ed Morrissey

The dollar may be soaring overseas, but the US economy has drifted toward stagnation — and it doesn’t seem to be looking better in 2015. Durable goods orders fell 1.4% in February, and even outside of the volatile transportation sector, it declined 0.4%. Business investment has turned for the worse as well:

New orders for manufactured durable goods in February decreased $3.2 billion or 1.4 percent to $231.3 billion, the U.S. Census Bureau announced today. This decrease, down three of the last four months, followed a 2.0 percent January increase. Excluding transportation, new orders decreased 0.4 percent. Excluding defense, new orders decreased 1.0 percent. Transportation equipment, also down three of the last four months, led the decrease, $2.5 billion or 3.5 percent to $69.5 billion. …

Nondefense new orders for capital goods in February decreased $2.1 billion or 2.6 percent to $77.3 billion. Shipments decreased slightly to $80.2 billion. Unfilled orders decreased $2.9 billion or 0.4 percent to $727.8 billion. Inventories increased $0.3 billion or 0.1 percent to $186.8 billion. Defense new orders for capital goods in February increased $0.8 billion or 10.2 percent to $8.3 billion. Shipments decreased $0.1 billion or 0.8 percent to $9.0 billion. Unfilled orders decreased $0.7 billion or 0.4 percent to $152.9 billion. Inventories increased $0.7 billion or 3.0 percent to $24.9 billion.

January’s more positive figures got revised downward as well, which had been a bright mark in a three-month negative trend. New orders had dropped 3.7% in December, rose 2% in January, and had this decline released today. Excluding transportation, this has been the third straight month of declines. Non-defense capital goods have declined two out of the last three months on a much more volatile scale: -10.3%, +8.8%, and today’s -2.8%, indicating that businesses aren’t terribly interesting in investing in their own infrastructure.

Bloomberg breaks out the “U” word in its report on the latest economic indicator, and says that business investment looks worse than these numbers indicate:

Orders for durable goods unexpectedly dropped in February, a sign the slowdown in global growth may be weighing on American manufacturers.

Bookings for goods meant to last at least three years declined 1.4 percent after a 2 percent gain in January that was smaller than previously estimated, data from the Commerce Department showed Wednesday in Washington. The median forecast of 81 economists surveyed by Bloomberg estimated durable goods orders would rise 0.2 percent. …

Orders for non-military capital goods excluding aircraft, considered a proxy for future business investment, also dropped 1.4 percent in February, a sixth consecutive decline. That marked the longest stretch of decreases since mid-2012. They were projected to rise 0.3 percent.

Shipments of non-military capital goods excluding aircraft, which is used to calculate gross domestic product, increased 0.2 percent in February after falling a revised 0.4 percent the month before. January had previously been reported as a 0.1 percent gain.

If business investment has been falling for six straight months, it’s difficult to see why a decline in durable-goods orders would be unexpected. It appears that businesses have been expecting this to happen for some time now, and have seen it happen two out of the last three months.

The Associated Press’ Martin Crutsinger was less surprised, and also somewhat more optimistic:

The weakness in February was widespread, with weaker demand for commercial aircraft, autos and machinery. The result adds to a slew of disappointing data from recent economic indicators. Economists, however, expect domestic demand to strengthen in the months ahead and hope that will be enough to offset weakness caused by a stronger dollar, which dampens export sales of U.S. companies. …

Many economists are looking for manufacturing orders to start strengthening following a stretch of weakness in the second half of last year. They believe the end of harsh winter weather and the resolution of a labor dispute at West Coast ports, which caused supply disruptions, should help.

They expect strong consumer spending, powered by a year of healthy job gains, will boost domestic demand and help to offset global weakness and the strong dollar.

Growth in the overall economy slowed significantly in the October-December quarter, with a widening trade deficit trimming growth by more than a percentage point.

The question will be just how long economists can count on strong PCEs to keep the numbers afloat. If the factories are seeing fewer durable-goods orders, it seems like a pretty good indicator that consumers might be getting more cautious with their cash. Given how inexpensive gas became when the oil bubble popped, one would have expected that sudden boost in disposable income to translate into gains in durable goods. With three of four months going negative, it’s clear that whatever produced the momentary boost in 2014Q3 is not sustainable, and neither are the policies that produced it — and the five years of stagnation that preceded it.


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Comments

… unexpectedly.

They keep using that word. I do not think it means what they think it means.

ConstantineXI on March 25, 2015 at 11:03 AM

Given how inexpensive gas became when the oil bubble popped, one would have expected that sudden boost in disposable income to translate into gains in durable goods.

Maybe because gas is not as inexpensive as it was a few months ago. Obviously the press doesn’t wanna talk about it, but the price at the pump is climbing back up again.

Doughboy on March 25, 2015 at 11:04 AM

Unemployment Rate for January 2015 is 23.2%. During the Not quiet as Great Depression, it was only 21%… Your Government is lying to you… with the full support of the Media, both new and old.

oscarwilde on March 25, 2015 at 11:05 AM

Is it too far away from the Great Recession to call this a double-dip, or is this to the Great Recession what the 1937 recession was to the first part of the Great Depression?

Steve Eggleston on March 25, 2015 at 11:06 AM

Maybe if my health insurance had not gone up 300%, I could afford a “durable goods” purchase.

fight like a girl on March 25, 2015 at 11:08 AM

Maybe because gas is not as inexpensive as it was a few months ago. Obviously the press doesn’t wanna talk about it, but the price at the pump is climbing back up again.

Doughboy on March 25, 2015 at 11:04 AM

It’s going down… it’s already falling in Colorado again.

NEW YORK (AP) — The price of oil is tumbling again, rattling an already-shaken oil industry and heralding lower prices for consumers.

The price of oil fell 10 percent this week, approaching its lowest price in six years. Many expect it to fall further in the coming weeks because supplies are rising and the summer driving season is still months away.

The lower crude prices will mean gasoline prices will slide lower in the coming weeks, and many drivers will likely pay under $2 a gallon in the summertime for the first time since 2004.

http://wtnh.com/2015/03/23/oil-is-on-its-way-down-again-will-gasoline-prices-follow/

FYI.

Walter L. Newton on March 25, 2015 at 11:08 AM

Its all boils down to a three lettered word…..jobs.

elvis lives on March 25, 2015 at 11:11 AM

Maybe if my health insurance had not gone up 300%, I could afford a “durable goods” purchase.

fight like a girl on March 25, 2015 at 11:08 AM

Oh we can fix that. We will mandate that you buy a “durable good” or pay a tax or penalty….or tax… or whatever Justice Roberts decides to call it.

Signed: Your friendly overlords in DC

chuckfinlay on March 25, 2015 at 11:12 AM

Constantine….they only use “unexpectedly” when theres a drop. When theres a gain, they say obamas business model is working.

elvis lives on March 25, 2015 at 11:13 AM

What the “brilliant” liberals fail to grasp is that the recession was caused by government intrusion into the economy. So what do they do……..increase the impact of government within the economy.

PS. The next GOP candidate better be like a heat seeking missile on the economy. Remember, “it’s the economy stupid”.

Tater Salad on March 25, 2015 at 11:14 AM

This isn’t rocket science… soaring dollars lead to falling exports.

A stronger dollar makes American goods more expensive. That’s not to say a strong dollar is all bad, nor is weak currency good… it just is.

bettercallputin on March 25, 2015 at 11:14 AM

Walter….so much for your hatred of high priced fossil fuels. :-)

elvis lives on March 25, 2015 at 11:15 AM

U.S. Steel to Temporarily Halt Operations in Granite City

http://www.foxbusiness.com/industries/2015/03/25/us-steel-to-temporarily-halt-operations-in-granite-city/?intcmp=marketfeatures

The company is issuing notices to 2,080 workers at its Granite City Works facility in Illinois.

Pork-Chop on March 25, 2015 at 11:15 AM

The company is issuing notices to 2,080 workers at its Granite City Works facility in Illinois.

Pork-Chop on March 25, 2015 at 11:15 AM

I would venture to guess it is because the cost of doing business in Illinois is too high due to government regulation?

Tater Salad on March 25, 2015 at 11:19 AM

Oil should be trading at about $20.00 per barrel, the only reason it isn’t, is OPEC blackmailed the entire world back in the 1970’s and people got used to it.

Now that it is returning to its true value, a lot of confused people are angry. They have gotten used to making a lot of money off the super hyper inflated cost of oil, now they stand to lose a lot of money.

oscarwilde on March 25, 2015 at 11:24 AM

O/T

…as we know, the media paints all GOP candidates as “evil” or “dumb”. They don’t have any “evil” material on Cruz and they definitely can’t use “dumb”, so WAPO had to come up with a new label. Cruz speaks articulate on every topic, and doesn’t use a teleprompter, so therefor, he is “an arrogant knowitall”

Megyn Kellys Lipstick on March 25, 2015 at 11:25 AM

I would venture to guess it is because the cost of doing business in Illinois is too high due to government regulation?

Tater Salad on March 25, 2015 at 11:19 AM

Same could be said of nearly every place north of the Ohio River.

There is a reason why industry grows in the South but declines in the North.

ConstantineXI on March 25, 2015 at 11:26 AM

I don’t understand why economists think that we are on the verge of “strong consumer spending”. Anyone been to the supermarket lately? $10/lb beef and $15 chickens are the order of the day.

EA_MAN on March 25, 2015 at 11:26 AM

It’s going down… it’s already falling in Colorado again.

Walter L. Newton on March 25, 2015 at 11:08 AM

Not around here. Maybe it’ll eventually go back down, but it’s been around $2.20 for several months now after falling below 2 bucks.

Doughboy on March 25, 2015 at 11:27 AM

I don’t understand why economists think that we are on the verge of “strong consumer spending”. Anyone been to the supermarket lately? $10/lb beef and $15 chickens are the order of the day.

EA_MAN on March 25, 2015 at 11:26 AM

Because they believe what Joseph Goebbels said. “Repeat a lie often enough, and it becomes the truth”.

oscarwilde on March 25, 2015 at 11:30 AM

Maybe if my health insurance had not gone up 300%, I could afford a “durable goods” purchase.

fight like a girl on March 25, 2015 at 11:08 AM

^^^ this.

I bet for the last twenty-five years that I averaged $100 per weekend at Lowes for some project. Now I need stuff from the garden center. Plants went up ~20% last Spring and again this Spring.

Prices everywhere have exceeded my threshold of pain. I can afford it, but choose not to. I’ll end up in a cave somewhere with a long gray beard.

Tsar of Earth on March 25, 2015 at 11:31 AM

But, but, but-the Dow Jones! The Dollar is soooo strong! Profits! Er, Target’s raising wages! Uh, Ted Cruz is running!

Just more gloom and doom from the Cons. Hey, how’s March Madness going?

Everything’s just fine you Obama Derangement Syndrome hacks.

It’s a beautiful day in this neighborhood,
A beautiful day for a neighbor.
Would you be mine?
Could you be mine?…

It’s a neighborly day in this beauty wood,
A neighborly day for a beauty.
Would you be mine?
Could you be mine?…

Dr. ZhivBlago on March 25, 2015 at 11:31 AM

Unemployment Rate for January 2015 is 23.2%. During the Not quiet as Great Depression, it was only 21%… Your Government is lying to you… with the full support of the Media, both new and old.

oscarwilde on March 25, 2015 at 11:05 AM

Considering ShadowStats keeps its secret sauce in the shadows, I’m not quite buying its 23.2% claim. I’d buy 9.3% (what it would be if the 6,538,000 who want to work but aren’t counted as unemployed, on a seasonal basis, were counted), or if you also want to include the involuntarily part time (a metric that is becoming increasingly unreliable as the definition of “involuntarily part-time” is changing), 13.4%.

Steve Eggleston on March 25, 2015 at 11:36 AM

I don’t understand why economists think that we are on the verge of “strong consumer spending”. Anyone been to the supermarket lately? $10/lb beef and $15 chickens are the order of the day.

EA_MAN on March 25, 2015 at 11:26 AM

I’ve often wondered the same thing. Here’s what I can come up with.

1. They don’t want Obummer to look bad.

2. They have money invested themselves so it behooves them to send out as many positive “waves” about the economy that they can.

3. They fervently believe that the government can fix/run the economy successfully through Keynesian Economics-to admit otherwise would be inconceivable to them.

4. They really do believe that economic prosperity will spiral upward-FOREVAH!

5. They wouldn’t be invited on Bloomberg, CNBC, etc. if they said the economy sucked (see #1 above-but blaming Boosh is an out if it gets too bad).

7. (Many of the talking heads are CEOs and business owners themselves-it’s bad for business to talk about negative realities.)

6. They’re actually just clueless people with degrees in economics and business administration that show that degrees in economics and business administration mean nothing.

Dr. ZhivBlago on March 25, 2015 at 11:40 AM

As for gasoline, here in my neck of the woods (Milwaukee area), it’s skyrocketing as the refinery (singular) that produces the Algore/Whitman Memorial RFG blend used by Milwaukee and Chicago (and only Miwlaukee and Chicago) switches to producing the summer blend.

Steve Eggleston on March 25, 2015 at 11:41 AM

United States
5m
Editor’s note: US stocks drifted lower Wednesday; shortly after 11:30am ET, the Dow was off 120 points and the Nasdaq was down 63. – Tom
End of note

http://www.breakingnews.com/

canopfor on March 25, 2015 at 11:47 AM

I’m not quite buying its 23.2% claim. I’d buy 9.3%

Steve Eggleston on March 25, 2015 at 11:36 AM

Yes… but you also blog drunk… So there’s that to take into consideration as well… <— Insert evil maniacal laughter here…

oscarwilde on March 25, 2015 at 11:49 AM

Out here in SOCAL, gasoline is around $3.30/gallon for 87 octane… that’s not helping…

Khun Joe on March 25, 2015 at 11:52 AM

Obama has made the situation BETTER not worse.
Numbers don’t lie
weedisgood on February 6, 2015 at 10:47 AM

Pelosi Schmelosi on March 25, 2015 at 11:55 AM

Maybe if my health insurance had not gone up 300%, I could afford a “durable goods” purchase.

fight like a girl on March 25, 2015 at 11:08 AM

.
KA-BOOM !!!! Now we’re talking! I’ll only add that besides premium increases the increases in co-pays also went up as well as “excluded” items under “YouKnowWhataCare” like vision care and dental care.
.
If anybody thinks government “cares” that body is going to lead a miserable, disappointed life.

ExpressoBold on March 25, 2015 at 11:55 AM

These people are pure geniuses, geniuses I tellya!

Saw on Bloomberg this morning that Moody’s is cutting Ukraine’s rating to “negative”…which means “Your little country, really, really sucks, but somebody somewhere will still loan you money-even if you go bankrupt-which you probably will.”

For the last two years now Ukraine has literally had dead people lying around in the streets, half their country is now gone, and folks never know when they’re going to be shot or disintegrated by incoming artillery.

I could have emailed Kiev and told them their economy is in a shambles a year ago and for free unlike the folks at Moody’s who are making serious bucks to formulate these conclusions that mere Proles can never begin to fathom.

Dr. ZhivBlago on March 25, 2015 at 11:59 AM

Durable goods, business investment drop …

Maybe if my health insurance had not gone up 300%, I could afford a “durable goods” purchase.

fight like a girl on March 25, 2015 at 11:08 AM

Anyone been to the supermarket lately? $10/lb beef and $15 chickens are the order of the day.

EA_MAN on March 25, 2015 at 11:26 AM

…all FEATURES, not bugs of the Odooooshbag economy..

Pelosi Schmelosi on March 25, 2015 at 12:00 PM

January’s more positive figures got revised downward as well…

Serious question, Ed – why do people write about these things as though this is a surprise? Why is there an air of credibility used when these initial figures are released, when EVERYONE knows the joke/reality is that they WILL be revised in a negative direction? Why do you participate in lending credibility to this?

Midas on March 25, 2015 at 12:01 PM

Anyone been to the supermarket lately? $10/lb beef and $15 chickens are the order of the day.

EA_MAN on March 25, 2015 at 11:26 AM

I used to do a lot of beef and chicken in my smoker at home.

Nowadays its just chicken. The price of a brisket is simply ridiculous.

Midas on March 25, 2015 at 12:02 PM

I used to do a lot of beef and chicken in my smoker at home.

Nowadays its just chicken. The price of a brisket is simply ridiculous.

Midas on March 25, 2015 at 12:02 PM

MMMMMMMMM…craving it even this early in the morning…

Pelosi Schmelosi on March 25, 2015 at 12:03 PM

Sorry…couldn’t resist…from zerohedge…

During his golfing vacation at Martha’s Vineyard – President Obama had been slicing off the tee on every hole. He asks his Scottish caddy if he has noticed any obvious reasons for his poor tee shots, to which the caddy replies: “Aye, there’s a piece of shyt on the end of yer driver. ” The President picks up his driver and cleans the club face, at which point the caddy says: “No, the other end.”

Pelosi Schmelosi on March 25, 2015 at 12:05 PM

Sorry…couldn’t resist…from zerohedge…

Pelosi Schmelosi on March 25, 2015 at 12:05 PM

.
LOL

ExpressoBold on March 25, 2015 at 12:12 PM

They expect strong consumer spending, powered by a year of healthy job gains, will boost domestic demand and help to offset global weakness and the strong dollar.

A year of healthy job gains? Replacing middle class, middle management / professional jobs with sub-30 hour a week jobs that pay less than double the minimum wage is ‘healthy’ from an economic standpoint? Earnings stagnation or slight declines? Near 40 year record low levels of labor participation? Real unemployment near 20%? African-American unemployment over 12% – for young African-American’s over 30%?

Strong consumer spending? Auto sales are up because of the Administration efforts to repeat past mistakes, and encouraging lenders to lend in the name of ‘fairness’ and ‘equality’ – which accounts for loans (home and car) being made to those who are being hammered the hardest in this stagnant economy and in the least favorable position to repay?

Are these really economists or political operatives shilling for Il Doofus?

Athos on March 25, 2015 at 12:35 PM

So, at what point are all these monthly “unexpected” drops going to be called what it is… the Great Obama Depression?

dominigan on March 25, 2015 at 1:08 PM

Must have been the weather. They will remove another million from the workforce so that the unemployment rate will go down.

alanstern on March 25, 2015 at 2:59 PM

Shouldn’t we all own yachts for an extra 8 trillion in debt???

WryTrvllr on March 25, 2015 at 10:15 PM

Not to worry! King Barack has a plan to ‘share the wealth’!

GarandFan on March 25, 2015 at 10:50 PM