Durable goods gets second straight decline as economy weakens

If you thought the US economy had begun showing signs of a slowdown, if not a recession, it wasn’t merely a figment of your imagination. For the second straight month, the durable goods report shows a decline even outside of the normally volatile transportation and defense sectors. In fact, the already negative August report got revised even further downward:

New orders for manufactured durable goods in September decreased $2.9 billion or 1.2 percent to $231.1 billion, the U.S. Census Bureau announced today. This decrease, down two consecutive months, followed a 3.0 percent August decrease. Excluding transportation, new orders decreased 0.4 percent. Excluding defense, new orders decreased 2.0 percent. Transportation equipment, also down two consecutive months, led the decrease, $2.2 billion or 2.9 percent to $75.5 billion.

Even worse, the closely scrutinized category of capital spending hit its second negative mark in a row — in a big way:

Nondefense new orders for capital goods in September decreased $5.9 billion or 7.6 percent to $72.2 billion. Shipments decreased $0.4 billion or 0.6 percent to $79.8 billion. Unfilled orders decreased $7.6 billion or 1.0 percent to $752.2 billion. Inventories increased $0.1 billion or 0.1 percent to $176.2 billion. Defense new orders for capital goods in September increased $1.1 billion or 12.3 percent to $9.7 billion. Shipments increased $0.3 billion or 3.1 percent to $10.3 billion. Unfilled orders decreased $0.6 billion or 0.4 percent to $148.2 billion. Inventories decreased $0.8 billion or 3.5 percent to $22.8 billion.

Capital goods dropped in both August and September. August’s revised numbers show a 7% decrease overall, a 4.7% decrease excluding defense, and a 1.6% decrease excluding aircraft. These numbers follow a less than spectacular July, in which capital spending outside of defense only increased 0.6%. Business investment gets reflected in capital goods spending, and the obvious takeaway is that businesses are shielding their cash in anticipation of some rocky times ahead.

Reuters reports that the report is a harbinger of “slower economic growth”:

A gauge of U.S. business investment plans fell for a second straight month in September, the latest indication that economic growth braked sharply in the third quarter.

The Commerce Department said on Tuesday non-defense capital goods orders excluding aircraft, a closely watched proxyfor business spending plans, slipped 0.3 percent last month after a downwardly revised 1.6 percent decline in August.

These so-called core capital goods were previously reported to have dropped 0.8 percent August. The data was the latest dour news for the manufacturing sector, which has been hobbled by a strong dollar and deep spending cuts in the energy sector.

The much-ballyhooed Q2 GDP estimate of 3.9% annualized economic growth does not appear to have been a trend:

According to a Reuters survey of economists, gross domestic product likely expanded at a 1.6 percent annual rate in the third quarter, slowing from a brisk 3.9 percent pace in the second quarter. The government will publish its advance third-quarter GDP estimate on Thursday.

Combined with the 0.6% final GDP estimate in Q1, we’re looking at a ~2.0% year in 2015. In other words, get prepared for yet another stanza in the stagnation resulting from Obamanomics.

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David Strom 5:21 PM on March 31, 2023