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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.

November Durable Goods Orders Soggy but Not Horrible

November durable goods orders data were soft, but not horribly so, continuing the theme we have seen this month for manufacturing sector indicators. Total durables orders were flat in November, while durables orders net of the volatile transportation equipment sector were down 0.1%, and neither of these indicators saw meaningful revisions to October data. Capital goods orders excluding (volatile) aircraft were down 0.5%, with a -0.6% revision to October levels.

The data are summarized well by the accompanying chart. Anyone looking for a noticeable pick-up in capital spending—hence in manufacturing—was disappointed by the “failure to launch” that is evident in the capital goods orders data. Then again, it is not like capital goods orders are in freefall, either.

We have been expecting a continuation of the softness that has been plaguing capital spending in particular and manufacturing in general. We think there is more behind this softness than merely the weakening oil prices and strengthening dollar that have been in place for about a year. Thus, as is evident in the chart, capital goods orders have actually been listless since early-2012, and much the same is true of exports, the other source of weakness for US manufacturing activity.

Relative to these expectations, it would be reassuring if factory-related indicators such as durables orders were resoundingly weak. That is not the case, but the ongoing lack of growth in capital goods orders and manufacturing activity is consistent with our forecast line, if not dramatically so.

In other news this morning, personal incomes rose nicely in November, as did consumer spending, but the services components of spending declined. On net, that news was a push vis-à-vis 4Q15 GDP growth expectations.

Thanks to all of you for your faithful support of our By the Numbers installments in 2015. Merry Christmas, Happy Chanukah, and hope 2016 is a prosperous one for you.

Orders for Nondefense Capital Goods
Orders for Nondefense Capital Goods Chart
Source: Census Bureau. As of 30 Nov 15

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.

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