Black Wednesday: Personal Income, Durables Orders, and New-Home Sales

Today was a veritable Black Friday for data junkies, with the government releasing data on personal income, durable goods orders, and new-home sales, as well as a host of lesser indicators. We cover the income and durables releases here, as new-home sales won’t be released until later today.

All in all, the news today smacked of soggy turkey. While retail sales and housing starts had looked better earlier this month, there was no sign of follow-through in today’s news. Durables orders were soft across industrial sectors, and there were some major downward revisions to income growth over the last six months. On net, today’s news does not indicate a weakening economy, but it does short-circuit claims of recent improvement in the pace of growth.

Net of the very volatile transportation equipment sector, durables orders have shown zero growth for the last four months. Orders for capital equipment have actually declined over that time. Both of these measures had spiked upward in June, so the recent softness merely offsets that earlier strength, but this is precisely the point. Those June increases had inspired hopes of a factory-sector acceleration, but the last four months’ data dash those hopes.

On the income side, one would expect recent, supposedly buoyant job growth to drive better growth in wage incomes, but today’s news said otherwise. The release incorporated more complete information from payroll tax returns filed over the last six months, and that new information resulted in private-sector wage incomes being revised downward a full percentage point, non-annualized. (See the red line to blue line in chart.) On net, income growth is stuck right on the trend path it has held to for the last five years. While this is not horrible, it clearly does not portend any sustained improvement in consumption growth.