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Survey Strength Is Not Resulting In Economic Strength


  • This is a weekly series focused on analyzing the previous week's economic data releases.
  • The objective is to identify what are leading indicators of economic activity in hopes of gaining insight as to whether the economy is strengthening or weakening.
  • This week, we examine auto sales, factory orders, construction spending, the ISM and PMI manufacturing and services surveys, and the jobs report for June.
  • The surveys of economic activity continue to be much stronger than the real economic data points.

Auto Sales

Consumers may say they are confident, but their enthusiasm for buying new cars is waning rapidly. Sales declined 1.7% on a year-over-year basis in June to a seasonally adjusted annual rate of 16.51 million, which is a new low for the year. Domestic auto sales for June declined 14.6% below last year's number. As I previously mentioned, inventories rose above 70 days in May for the first time since 2009, and incentives continue to increase, rising 9.7% above year-ago levels in June. Those more optimistic about the economy will say that the current rate of sales is still strong, but economics is about the rate of change, which continues to erode after achieving a peak sales rate for this cycle of more than 18 million autos per year in 2016.

Factory Orders

Factory orders measure the change in dollar value for both durable and non-durable goods orders, updating the most recent durable goods report with more information. Factory orders declined 0.8% in May, and April's decline of 0.2% was revised lower to 0.3%. Orders for durable and non-durable goods were both lower by 0.8%. A double-digit decline in aircraft orders (commercial and defense) weighed heavily on the May number, but there was a 1.2% increase in orders for motor vehicles and parts. Yet, this only adds to what are already bloated inventories, which will depress future orders in this category.

On a positive note, when we exclude the transportation and defense sectors, core capital goods orders (business investment) rose 0.2% in May, and the shipments of these goods, which is used to compute GDP, rose 0.1%. Still, there is nothing here to indicate an acceleration in the rate of economic growth.

Construction Spending

The construction spending report includes the total value of all new construction activity for residential, non-residential, and

This article was written by

Lawrence Fuller profile picture
A foundation, framework and discipline for optimizing portfolio performance

Lawrence is the publisher of The Portfolio Architect. He has more than 25 years of experience managing portfolios for individual investors. He began his career as a Financial Consultant in 1993 with Merrill Lynch and worked in the same capacity for several other Wall Street firms before realizing his long-term goal of complete independence when he founded Fuller Asset Management. He graduated from the University of North Carolina at Chapel Hill with a B.A. in Political Science in 1992.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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