Econoday Economic Report: Durable Goods Orders September 27, 2012

2012 Economic Calendar

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Durable Goods Orders

Released On 9/27/2012 8:30:00 AM For Aug, 2012

	Prior	Prior Revised	Consensus	Consensus Range	Actual
New Orders - M/M change	4.2 %	3.3 %	-5.0 %	-9.4 % to -1.1 %	-13.2 %
Ex-transportation - M/M	-0.4 %	-1.3 %	0.2 %	-1.9 % to 0.7 %	-1.6 %

Highlights
You had to look very hard to find any good news in the latest durables report. Manufacturing has lost significant momentum with nondefense aircraft leading the way down. New factory orders for durables plunged a whopping 13.2 percent (monthly) in August after a revised 3.3 percent boost in July (originally up 4.2 percent and revised to 4.1 percent in that July factory orders report). Excluding transportation, orders dipped 1.6 percent, following a 1.3 percent decline in July.

The transportation component fell 34.9 percent after a 13.1 percent gain in July. Leading the way down, civilian aircraft orders dropped a monthly 101.8 percent. Yes, that is more than 100 percent, meaning Boeing lost orders net for the month, compared to the prior month. Motor vehicles also contributed to the drop in transportation orders, falling 10.9 percent after a 12.1 percent advance the prior month. Rounding out the transportation subcomponents, defense aircraft orders declined 8.1 percent in August.

Weakness was broad based outside of transportation with declines seen in all major industries except one. Electrical equipment rebounded in August.

Overall investment related numbers were pulled down by aircraft, but excluding aircraft rose slightly. Nondefense capital goods orders dropped 24.3 percent, following a 4.8 percent gain in July. Nondefense capital goods orders excluding aircraft edged up 1.1 percent in August, following a decrease of 5.2 percent the prior month. Shipments for this series slipped 1.7 percent, following a 1.1 percent decline in July.

The bottom line is that there is further evidence of significant slowing in manufacturing in August. However, a few regional Fed manufacturing surveys have been a little more positive in September. Perhaps August was the bottom in the slowing in manufacturing but there are cross currents from slower growth in Asia and recession in much of Europe versus modest demand growth in the U.S.

Market Consensus before announcement
Durable goods jumped 4.1 percent in July on top of a 1.6 percent jump in June. But when looking at orders excluding transportation equipment the story was one of softness with the reading at minus 0.4 percent following a downwardly revised minus 2.2 percent result in June. Civilian aircraft orders surged a monthly 53.9 percent in July following a 32.5 percent surge in June. But also part of the July gain for transportation equipment were motor vehicle orders which jumped 20.6 percent following a 1.8 percent dip in June. Numbers reflect revisions from the more recent total factory orders report.

Definition
Durable goods orders reflect the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. The first release, the advance, provides an early estimate of durable goods orders. About two weeks later, more complete and revised data are available in the factory orders report. The data for the previous month are usually revised a second time upon the release of the new month's data. Why Investors Care

Monthly fluctuations in durable goods orders are frequent and large and skew the underlying trend in the data. In fact, even the yearly change must be viewed carefully because of the volatility in this series.
Data Source: Haver Analytics

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