Wednesday, November 26, 2014
Inquirer Daily News

Goods orders not-so-durable

Economics in a nutshell: Demand for big-ticket items plummeted in March as orders for civilian aircraft crashed. Okay, bad descriptor, but you get the picture.

Goods orders not-so-durable

FILE - This Feb. 11, 2013 file photo shows a Boeing 787 jet taxing following a test flight, at Boeing Field, in Seattle. The Boeing Co. reports quarterly financial results before the market opens on Wednesday, April 24, 2013.(AP Photo / Elaine Thompson, File)
FILE - This Feb. 11, 2013 file photo shows a Boeing 787 jet taxing following a test flight, at Boeing Field, in Seattle. The Boeing Co. reports quarterly financial results before the market opens on Wednesday, April 24, 2013.(AP Photo / Elaine Thompson, File)

INDICATOR: March Durable Goods Orders

KEY DATA: Durables: -5.7%; Civilian Aircraft: -48.2%; Business Investment: +0.2%

IN A NUTSHELL: "The Boeing boomerang may have crashed orders but there was little strength anywhere else."

WHAT IT MEANS: Demand for big-ticket items plummeted in March as orders for civilian aircraft crashed. Okay, bad descriptor, but you get the picture. Boeing's orders tend to be up and down and their backlog is so far into the future that their monthly changes have to be taken out of the discussion. Still, even when you exclude aircraft, there were few places where orders picked up. Computers and communication companies did quite well and there was a small increase in motor vehicles but demand for metals, machinery, electrical equipment and appliances was down. Non-defense capital orders excluding aircraft, a measure of business investment, did post a modest increase, but nothing to indicate any major exuberance. And with order books thinning, there is not a whole lot of hope that the manufacturing sector will accelerate sharply anytime soon.

MARKETS AND FED POLICY IMPLICATIONS: This was a weaker than expected report which adds to the belief that the economy has hit another soft spot. Why, is a different discussion. The sequestration impacts are beginning to show up. This has been aptly described as a slow-motion train wreck and the crash is now underway. Consumers have been adjusting to the higher taxes and while lower gasoline prices are helping, the positive impacts are probably not yet balancing the higher tax payments. And given that Washington remains a vast wasteland, there is no reason to think fiscal policy will become sane anytime soon. With that said, we should see a decent GDP report on Friday. Consensus is for about a 3% rise. After having been an outlier on the high side for six months, I am now a little bit below the average. The weak orders create the likelihood that spring growth will be slower. Investors are probably totally confused about where the economy is going and with prices having come so far, continued volatility in the markets is likely.

About this blog
Joel L. Naroff is the president and founder of Naroff Economic Advisors, a strategic economic consulting firm in Bucks County. He advises companies across the country on the risks and opportunities that economic developments may have on the organization’s operating environment. An accomplished public speaker, Joel’s humor and unique ability to make economics understandable have brought him a wide following. Reach Joel at joel@naroffeconomics.com .

Joel Naroff
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