By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

Sign up to receive an email as pertinent data are released.

Another Disappointing Month for Durable Goods and CAPEX

Today’s report on durable goods orders suggests near-term problems for the US manufacturing sector. True, headline durables orders were up 2.8%, which sounds substantial. However, virtually all that gain occurred in aircraft orders, and as the green line in the accompanying chart shows, even those gains failed to fully reverse previous months’ declines in aircraft orders.

For total durables orders excluding aircraft, there were small January gains (+0.3%) which did not come close to reversing substantial declines over the previous months. The recent course of total durables orders has run parallel to that of capital goods orders excluding aircraft, the blue line in the chart. After flat orders in July and August, we saw substantial declines over September–December, and then only a slight gain in January.

Any economic series displays random fluctuations, so one must be careful interpreting data over one or two months. However, when a series holds below trend for four months, as have capital goods orders and total durables orders, those movements become more credible. This is especially true when we have confirming trends in an accompanying series, and recently the Federal Reserve’s index of industrial production in manufacturing has slowed.

In the last installment of “By the Numbers,” we described the US housing market as a three steps forward, two steps backward affair. The same can be said of the US economy overall, and recently, manufacturing has been one of those backward steps.

Orders for Nondefense Capital Goods
Orders for Nondefense Capital Goods Chart
Source: Census Bureau. As of 31 Jan 15

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 40 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

Sign up to receive an email as pertinent data are released.

© Western Asset Management Company 2017. This publication is the property of Western Asset Management Company and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. Investments are not guaranteed and you may lose money. This publication is for informational purposes only and reflects the current opinions of Western Asset Management. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset Management may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence. Potential investors in emerging markets should be aware that investment in these markets can involve a higher degree of risk. Any forecast, projection or target is there to provide you with an indication only and is not guaranteed in any way.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorised and regulated by Comissão de Valores Mobiliários and Banco Central do Brasil. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered financial instruments dealer whose business is investment advisory or agency business, investment management, and Type II Financial Instruments Dealing business with the registration number KLFB (FID) No. 427, and members of JIAA (membership number 011-01319) and JITA. Western Asset Management Company Limited (“WAMCL”) is authorised and regulated by the Financial Conduct Authority (“FCA”). In the UK this communication is a financial promotion solely intended for professional clients as defined in the FCA Handbook and has been approved by WAMCL.