New Orders in Durable Goods decreased -0.1% for August 2011. New Orders has declined the last three months out of five. July durable goods new orders were revised from +4.0% to +4.1% increase.
Most of the decrease was in primary metals, new orders down -0.8%. Motor vehicles new orders dropped -8.5% for August. Defense capital goods also dropped -5.7% in new orders. Computers popped up +5.5% and communications gear increased 7.8%.
Core capital goods new orders increased +1.1%, after dropping -0.2% in July. July was revised significantly upward, originally reported as a -1.5% decline. Core capital goods is an investment gauge for the bet the private sector is placing on America's future economic growth.
For all transportation equipment, new orders flat lines -0.1%.
We now have two increases in new orders for the last four months, or 50-50 (sic). Seriously, this decline is more of a flat line, so the phrase it could have been worse about sums up this durable goods data report.
Core capital goods are a leading indicator of future economic growth. It's all of the stuff used to make other stuff, kind of an future investment in the business meter. Core capital goods excludes defense and all aircraft. Shipments in core capital goods increased +2.8% and July core capital goods shipments were revised to +0.4%. Machinery is a large part of core capital goods and new orders in machinery for the last three months are +0.1%, +1.9% and -1.4% for August, July, June, respectively. Core capital goods are back to 2007, or pre-recession levels. That said, this report is not adjusted for inflation.
It's typical for aircraft to vary dramatically, after all who orders up a billion dollar air-o-plane every day? This report is often dramatically revised as well.
To put the monthly percentage change in perspective, below is the graph of core capital goods, monthly percentage change going back to 2000. In January 2009, core capital goods new orders dropped -9.9% and also declined by -9.4% in December 2008.
Inventories, which also contributes to GDP, are at an all time high and up 0.9%. Five months now inventories have hit record highs since inventories have been tracked via the NAICS system. Core Capital Goods inventories increased +0.8%.
Unfilled orders increased +0.9% with aircraft & parts, defense and nondefense, having unfilled orders at +1.7%.
Shipments, which contributes to the investment component of GDP, is down -0.2% for August with July revised to +2.1%. In August, motor vehicles and parts shipments decreased -8.5% and machinery increased +5.5%.
In core capital goods, shipments increased +2.8% for August, after a +0.4% July increase. June's revision is now +2.0% from +1.0% and is much better news as an approximation and indicator on Q2 2011 GDP growth. August's numbers are great news for Q3 2011 GDP as well.
Q2 GDP 3rd revision is released tomorrow. The graph below is core capital goods shipments, quarterly annualized percent change. Today's durable goods report holds much better news for the Q2 GDP third revision (although trade assuredly will drag it down!).
Memory help: Q2 is April, May & June. Q3 is July, August & September.
Producer's Durable Equipment (PDE) is part of the GDP investment metric, the I in GDP or nonresidential fixed investment. It is not all, but part of the total investment categories for GDP, usually contributing about 50% to the total investment metric (except recently where inventories have been the dominant factor).
Producer's Durable Equipment (PDE) is about 75%, or 3/4th of the durable goods core capital goods shipments, used as an approximation.
What is a durable good? It's stuff manufactured that's supposed to last at least 3 years. Yeah, right, electronics, laptops and cell phones.
Here is last month's overview of Durable Goods, numbers unrevised.