The August Advance Report on July Durable Goods was released this morning by the Census Bureau. Here is the Bureau's summary on new orders:
New orders for manufactured durable goods in July decreased $17.8 billion or 7.3 percent to $226.6 billion, the U.S. Census Bureau announced today. This decrease, down following three consecutive monthly increases and followed a 3.9 percent June increase. Excluding transportation, new orders decreased 0.6 percent. Excluding defense, new orders decreased 6.7 percent.
Transportation equipment, also down following three consecutive monthly increases, led the decrease, $16.7 billion or 19.4 percent to $69.7 billion. This was led by nondefense aircraft and parts, which decreased $14.5 billion. Download full PDF
The latest new orders number at -7.3% percent was well below the Investing.com forecast of -4.0 percent. Year-over-year new orders are down 0.3% percent.
If we exclude transportation, "core" durable goods were a less negative -0.6 percent and up 5.9 percent YoY. Investing.com was looking for a 0.5% MoM increase.
If we exclude both transportation and defense, durable goods were up 0.8 percent MoM and up 8.9 percent YoY.
The first chart is an overlay of durable goods new orders and the S&P 500. We see an obvious correlation between the two, especially over the past decade, with the market, not surprisingly, as the more volatile of the two.
An overlay with unemployment (inverted) also shows some correlation. We saw unemployment begin to deteriorate prior to the peak in durable goods orders that closely coincided with the onset of the Great Recession, but the unemployment recovery tended to lag the advance durable goods orders.
Here is an overlay with GDP - another comparison I like to watch closely.
The next chart shows the percent change in Core Durable Goods (which excludes transportation) overlaid on the headline number.
Here is a similar overlay, this time excluding Defense as well as Transportation (an even more "core" number).
This last chart is an overlay of Core Capital Goods on the larger series. This takes a step back in the durable goods process to show Manufacturers' New Orders for Nondefense Capital Goods Excluding Aircraft.
In theory the durable goods orders series should be one of the more important indicators of the economy's health. But its volatility and susceptibility to major revisions of the previous monthly data suggest caution in taking the data for any particular month too seriously.