Wednesday, June 24, 2009

Durable Goods Manufacturers' Shipments Reported Down 19%, and That's the GOOD News

The Census Bureau and Commerce Department have reported their monthly estimate of durable goods shipped. The media are portraying the news as good, with some monthly sales gains. No dispute there. Sadly, what the media does not give is the actual data, which EBR receives by Email monthly from the U. S. Government free of charge. Here are some data.

May 2009 vs. May 2008, shipments are down 19% (to $170 B) and new orders are down 27% (to $161 B). These are monthly, not annualized numbers, so this is a significant part of the economy.

Re the ratio of shipments to new orders, in May 2008, they were in balance, $215 B vs. $213 B. Despite the improvement in orders, the ratio remains worse now, with shipments in May 2009 as described above, $170 B vs. $161 B.

Thus, shipments continue to exceed new orders by a greater absolute amount and by a greater ratio than one year ago.

Consider that nondefense orders for new aircraft AND parts are down 73% year on year.

The overall trends are indeed improving, but when you are looking at year on year new orders down 27% in comparison with a month one year ago that was already 6 months into a recession, times are tough. If something drops from 100 to 73 to equal a 27% drop, then an increase of over one-third is needed just to get back to baseline; forget about the growth that was expected when the index was at 100. This is depression math. Much sustained growth is needed just to get get back where we were not long ago.

Copyright (C) Long Lake LLC 2009

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