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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.

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 44 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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