Crash!
Durable goods orders and shipments crashed in December.
The Econoday Consensus Estimate for durable goods new orders was a 0.2% rise. Here are the amazing results.
Crash vs. Thud
Econoday called the results a “giant thud”. The words “giant crash” seem more appropriate. In retrospect, both terms may be inappropriate. Have we landed yet, or are we still falling?
Econoday reports …
The factory sector ended 2015 with a giant thud. Durable goods orders fell 5.1 percent in December vs expectations for a 0.2 percent gain and a low-end estimate of minus 3.0 percent. Aircraft orders didn’t help but they weren’t the whole cause of the problem as ex-transportation orders fell 1.2 percent vs expectations for no change and a low-end estimate of minus 0.4 percent. Core capital goods, which exclude defense equipment and also aircraft, are especially weak, down 4.3 percent following a 1.1 percent decline in November. Shipments for core capital goods, which are an input into GDP, slipped 0.2 percent following a downward revised 1.1 percent decline in November (initially minus 0.4 percent).
Orders for civilian aircraft lead the dismal list, down 29 percent in December. The other main subcomponent for transportation, motor vehicles, also fell, down 0.4 percent in a reminder that vehicle sales were slowing at year end. Capital goods industries show deep declines: machinery down 5.6 percent, computers down 8.7 percent, communications equipment down 21 percent, and fabricated metals down 0.5 percent.
Other readings include a surprising 2.2 percent monthly drop in total shipments and a 0.5 percent drop in total unfilled orders. All this weakness isn’t a plus for inventories which rose 0.5 percent to lift the inventory-to-shipments ratio sharply, to 1.69 from 1.64. The rise in inventories poses a headwind to the sector and will dampen future shipments as well as employment and is a reminder of the inventory warning in yesterday’s FOMC statement.
Inventories Up 5 Consecutive Months
Those who wish to dive into the details can do so at the Census Bureau report Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders December 2015.
Here are some additional inventory highlights:
- Inventories of manufactured durable goods in December, up following five consecutive monthly decreases, increased $2.1 billion, or 0.5 percent, to $397.9 billion. This followed a 0.2 percent November decrease.
- Transportation, up following three consecutive monthly decreases, led the increase, $1.8 billion or 1.4percent to $131.8 billion.
Autos Down 4th Quarter
Of other note, the auto sector that had been on fire in 2015 went negative in the fourth quarter.
- October, November, December shipments for motor vehicles and parts were -2.9%, +1.1%, -0.4%.
- October, November, December orders for motor vehicles and parts are -3.0%, +1.0%, -0.4%.
Recession Here?
In contrast to the preposterous Fed model that says that says the odds of a recession in all of 2016 is a mere 3.56%, this report strengthens the odds the US economy is already in recession.
For further discussion, please see Fed “Workhorse” Model Says Odds of Recession in Next Year Only 3.56%; What are the Real Odds?
Mike “Mish” Shedlock