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By the Numbers

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

The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.


Durable Goods Orders Slog Lower in September

New orders for durable goods declined by -1.1% in September, with slight downward revisions to the previously announced August level. This headline aggregate of course includes orders for transportation equipment, which are very important, but which are also extremely volatile in the short run. Presently, the woes of the 737 Max and an auto workers’ strike are exacerbating the short-term ups and downs of the transportation equipment sector. Net of that component, new orders for durable goods excluding transportation equipment showed a slight -0.3% decline, about offsetting an equal-sized gain in August.

Now, even the slight decline ex-transportation equipment is a disappointment, but as you can see in the chart, all the measures of durable goods orders look to be stabilizing in recent months, after seeing general declines at the outset of the year. Meanwhile, orders for nondurable goods have shown a distinct bounce over the last three months. So, things are not rosy within the US durable manufacturing sector, but neither do they look to be in a dizzying slide.

In fact, all the "hard data" for manufacturing show at least such a stabilization in recent months, suggesting that the declines the sector has been suffering lately might be ebbing away. This is in stark contrast to the signals of the Institute for Supply Management (ISM) Index for Manufacturing, which had been sailing along above 50% through July—indicating an expanding factory sector—only to stumble badly in August and September.

So, what is the truth? A suddenly, recently plunging factory sector, as indicated by the soft data ISM index, or a factory sector that started sucking wind nearly a year ago but that has shown signs of stabilization lately, as is indicated by the range of hard data manufacturing indicators such as new orders and shipments, industrial production, production jobs and production hours worked? This is the running debate right now, and our experience leads us to side with the hard data every time.

The putative condition of the manufacturing sector is a major input into one’s views on whether the US economy is sliding into recession or not. Our more sanguine take on the relevant factory sector data is just one more reason we doubt that a recession is brewing.

Durable Goods Orders
Durable Goods Orders - Total Less Transportation and Total Less Defense
Source: Census Bureau. As of 30 Sep 19

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 43 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.

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