The US economy sent mixed signals today, and even some mixed signals within the mixed signals.  Good news on durable-goods orders bolstered markets, but there were concerns within the report about business investment.  First, the Commerce release:

New orders for manufactured durable goods in July increased $7.7 billion or 4.0 percent to $201.5 billion, the U.S. Census Bureau announced today.  This increase, up two of the last three months, followed a 1.3 percent June decrease.  Excluding transportation, new orders increased 0.7 percent.  Excluding defense, new orders increased 4.8 percent.  Transportation equipment, also up two of the last three months, had the largest increase, $6.7 billion or 14.6 percent to $53.0 billion. This was led by nondefense aircraft and parts which increased $3.2 billion.

That’s certainly good news, especially in the transportation sector.  However, the gains in that industry mainly came from new orders in nondefense airplanes, up 43% from June, while the auto industry bounced back appreciably but less spectacularly with an 11.5% increase in new orders.  However, inventories continue to rise to record levels:

 Inventories of manufactured durable goods in July, up nineteen consecutive months, increased $2.9 billion or 0.8 percent to $361.0 billion.  This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a 0.6 percent June increase.  Transportation equipment, also up nineteen consecutive months, had the largest increase, $1.7 billion or 1.5 percent to $110.8 billion.  This was also at the highest level since the series was first published on a NAICS basis and followed a 1.2 percent June increase.

Excessive inventory will create a bubble if demand does not rise quickly, which will depress factory activity and new orders in the future.  When inventories start declining and orders rise, then we will know that we have a real boost in economic activity through the entire economy.

Reuters points to another potential red flag for business investment:

But non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 1.5 percent last month after a revised 0.6 percent rise in June.

Economists had expected a 1 percent fall from a previously reported 0.4 percent gain.

The decline in business spending plans, coming on the heels of weak readings from regional factory surveys so far this month, could add to fears that the manufacturing sector is running out of steam.

It’s not unusual to see a decline in the first month of a quarter in capital investment, as businesses reconcile their books, Reuters says, but the depth of the decline may come as a surprise.  This comes during a period when the federal government is offering tax incentives for business investment, too, as part of the tax deal between Barack Obama and Republicans in December 2010.  It doesn’t appear to have changed behavior much in the marketplace.

The housing market reported bad news today, as mortgage applications for purchases (as opposed to refinancing) dropped to a 15-year low:

Home mortgage applications for purchases fell to a nearly 15-year low last week as resurgent worries about the strength of the economy kept buyers at bay, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 2.4 percent in the week ended August 19.

The seasonally adjusted gauge of loan requests for home purchases tumbled 5.7 percent to its lowest level since December 1996, the MBA said. Refinance demand also sagged as interest rates rose, with the refinance index slipping 1.7 percent.

Until we get more people employed, we will not produce more qualified homebuyers to seek mortgages.  And until businesses can quantify their risks for investment in expansion and growth, we won’t see much job creation beyond that which keeps up with population growth — if we even see that much.