skip navigation

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: Another Middling Number, but Not the Star of the Day

The main focus today is the durable goods orders release, but we'll cover today's "final" revision to GDP as well. Manufacturing, especially durables manufacturing, has been one of the non-dark spots for the economy so far this year. (We can't quite call it a bright spot, but it has performed better than the construction or service sectors.)

Data from the Federal Reserve on industrial production show factory output rebounding in the spring enough to more than offset the earlier weakness induced by the polar vortex. In fact, industrial production is the only major economic indicator released by the government where the spring rebound has more than offset winter softness.

A separate, somewhat different take on US manufacturing is provided by the Census Bureau's report on factory orders and shipments. Durables orders is an advance take on that release. They too show a spring rebound, but not so strong as that indicated by industrial production.

As seen in the chart, durable goods orders show a winter slump and a March rebound, but no change since then. We prefer the measure excluding transportation equipment, because it is less volatile, but all three measures in the chart exhibit essentially the same pattern: the post-winter rebounds bring activity levels back to pre-2014 trend lines, but there has been no above-trend production in spring to offset below-trend winter activity. In sum, however you slice it, average orders for 2014 to date are softer than what we saw in 2013.

We shouldn't overstate the importance of this below-trend-on-average performance for 2014 to date. It is clear that there is no indication in these data of any improvement in factory activity from the sluggish trends of the past 18 months. So, the durable goods data show a less favorable reading on the factory sector than what the industrial production data are now saying. We'll have to wait and see which proves to be the more accurate assessment.

Meanwhile, 1Q14 GDP data were revised downward surprisingly sharply, to -2.9%, from -1.0% a month ago and +0.1% two months ago. Most of this revision was due to erasing the previously estimated stimulus to health care consumption from Obamacare. While the weather-related 1Q14 declines in inventories, goods consumption, and foreign trade should be reversed in 2Q14, the Obamacare-related markdowns will have no offset in 2Q14 data.

Durable Goods Orders
June Durable Goods Orders Chart
Source: Census Bureau. As of 31 May 14

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 45 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 email updates as new reports are released.

© Western Asset Management Company, LLC 2022. This publication is the property of Western Asset 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. This publication is for informational purposes only and reflects the current opinions of Western Asset. 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 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.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorized and regulated by Comissão de Valores Mobiliários and Brazilian Central Bank. 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 Business Operator and regulated by the Financial Services Agency of Japan. Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) (FRN 145930). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK as defined by the FCA. This communication may also be intended for certain EEA countries where Western Asset has been granted permission to do so. For the current list of the approved EEA countries please contact Western Asset at +44 (0)20 7422 3000.