September 27, 2012
The Commerce Department reported that durable goods orders fell by 13.2 percent in August, not surprisingly the Wall Street Journal chose to highlight this drop. While the number is dramatic, nearly all of the drop was in the highly volatile transportation component. Excluding transportation, orders fell by a considerably more modest 1.6 percent.
Within transportation, civilian aircraft stood out with a decline in orders of 101.8 percent. Yes, the number was over 100 percent, as apparently there were more orders canceled in August than added.
Clearly there are some issues of timing here, but at the moment not very much cause for concern. If we want to know how businesses are thinking about the future, we might look at orders for non-defense capital goods, excluding aircraft, which rose by 1.1 percent in August, albeit after two sharp monthly declines. Anyhow, the overall picture in this report is negative but certainly not the disaster that the WSJ article implies. Given that weekly unemployment claims hit a new low for the recovery, a wait for evidence view might be appropriate.
Correction: Bill Heffner’s comment below is right. The 359,000 claims reported in the most recent week is higher than two week in July, in which the number of claimsreported were 352,000 and 357,000. It is worth noting that claims are almost always revised upward, but usually by a small amount.
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