Durable Goods: Weakening, But Not Too Weak

Thursday, Reuters had the following headline on durable goods:

April durables orders weak, jobless claims rise

New orders for U.S. durable goods rose by a weaker-than-expected 0.6 percent in April as volatile transportation orders fell, while initial claims for jobless benefits rose by 15,000 in the latest week, government reports showed on Thursday.

I frequently criticize the way economic data are reported (seasonally adjusted, month-to-month change) and the way they are often interpreted. In this case, it seems that both are painting a picture that is consistent with my own read - weakening but not too weak. Here is the chart of overall durables, measured with the unadjusted year/year change as illustration:

A little spike up this month, but not enough to call an end to the recent slide.

Since everyone seems to be calling this one about right, I decided to look for the industry groups that don’t fit the mold - either clearly weakening or clearly strengthening. I found a few pockets of strength.

I start with primary metals. Orders and shipments are clearly trending up, while inventory growth is being reigned in. About the only thing to watch out for is the flat backlog.

A similar, if not stronger, story applies to electrical equipment, appliances and components:

Transportation equipment seems to be getting back on track, gaining ground or taking off (depending on the mode of transportation).

Particularly non-defense aircraft and parts.

The stronger industries may be better poised to weather a downturn and could also be leaders into a reaccelerating economy.