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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 Durables Orders Continue Factory Softening Signs

Headline durable goods orders showed a 0.7% increase in November, off an October print that was essentially unrevised. As always, though, the devil is in the details, and these were not favorable. Net of the very volatile transportation equipment component, durable goods orders showed a 0.3% decline, alongside a +1.7% revision to October. While the revisions offset the November decline, the net movement in this series has remained largely flat over the last seven months, after strong growth in 2017 and early 2018. Also, even for the headline number, that November gain is only a partial offset to the 4.3% decline reported for October.

Similarly, new orders for capital equipment continued soft, with orders for capital equipment excluding aircraft declining 0.6%, only partially offset by a +0.5% revision to October. As seen in the chart, capital goods orders have been trending lower for the last four months, and the November news is just a continuation of that trend.

Also, while orders for aircraft and parts increased 17.5% in November, even that gain is only chump change compared to a 54.5% cumulative decline over August and September. All in all, aircraft activity is flat at best, and CAPEX activity, which should be strengthening in the wake of corporate tax reform, has hit a speed bump, after strong growth over the preceding two years.

We’ve been emphasizing in these posts that it is manufacturing that has powered what pick-up the US economy has seen over the last two years, that that pick-up has been driven by foreign trade and capital spending, and that exports, capital spending, and factory activity in general have all been softening in recent months. Along with declines in homebuilding, we believe this concerted softening is enough to pull aggregate US growth down to the 2% range from the 2.8% enjoyed over the last two years. Today’s durable goods news is right in line with this outlook.

Orders for Nondefense Capital Goods
Orders for Nondefense Capital Goods
Source: Census Bureau. As of 30 Nov 18

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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