Wednesday, September 25, 2013

It's The Economy Stupid: Durable Goods Climbs as Investment Recovers

Economic Event


Economic Survey

Actual Reported

Original Prior

Revised Prior

MBA Mortgage Applications

Sep 20





Durable Goods Orders






Durables Ex Transportation






Cap Goods Orders Nondef Ex Air






Cap Goods Ship Nondef Ex Air






New Home Sales






New Home Sales MoM






Household Change in Net Worth







Durable Goods

Orders for U.S. equipment such as computers and machinery climbed in August, indicating business spending is beginning to strengthen.       Bookings for non-military capital goods excluding aircraft increased 1.5 percent after a 3.3 percent drop in July. Demand for all durable goods, those meant to last at least three years, rose 0.1 percent after plunging 8.1 percent in July.  Consumer demand for autos and housing is rippling through manufacturing, giving companies the confidence to invest in expanding operations. Further improvement in the labor market, a pickup in global growth, a resolution to the budget debate in Washington and lower borrowing costs as Federal Reserve policy makers hold off on trimming stimulus would spur additional production gains through the second half of the year.  Excluding transportation equipment, where demand is often volatile month to month, orders declined 0.1 percent after a 0.5 percent drop in July. Forecasts for total durable goods orders in the Bloomberg survey of economists ranged from a drop of 4.5 percent to a 5.5 percent advance. The decline in July was revised from a previously reported 7.4 percent drop.


Capital Goods

Demand for non-defense capital goods excluding aircraft is considered a proxy for future business investment in computers,

electronics and other equipment. Last month’s increase was the biggest since May.  Shipments of those products, a measure used to calculate gross domestic product, advanced 1.3 percent in August after declining 1.4 percent the prior month. Sales were down 3.3

percent over the past three months at an annualized rate, compared with a 0.9 percent decline at the end of the second quarter, indicating business investment will take time to rebound.  One bright spot for manufacturers is growth in demand for motor vehicles. Cars and light trucks sold at a 16 million annualized rate last month, the fastest since November 2007, after 15.7 million in July, figures from Ward’s Automotive Group showed. Sales at General Motors Co., Ford Motor Co., Toyota Motor Corp. and Honda Motor Co. exceeded analysts’ estimates last month.


Housing Rebound

The real estate recovery, which has boosted household wealth and fueled orders for furniture and appliances, is showing signs of cooling amid higher borrowing costs. While the S&P/Case-Shiller index of property values in 20 cities increased 12.4 percent from July 2012, price appreciation slowed on a month-to-month basis.


John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury



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