US Durable Goods Orders Disappoint

Alan Penny

24 October 2019

3 min read

dollar notes under US flag

  • Core Durable Goods Orders month-over-month less than expected
  • Durable Goods Orders month-over-month show huge miss
  • Unemployment claims close to expectations

The US Core Durable Goods Orders month-over-month figure came out during the session on Thursday, just as the Durable Goods Orders number was released. This economic release tracks the total value of new purchase orders placed with manufacturers for durable goods, including transportation items with the “Core” announcement, and excluding transportation items. This monthly release is a leading indicator of production, suggesting whether manufacturing is picking up or not.

The announcement

The numbers weren’t good. The Durable Goods Orders month-over-month figure (including transportation) came out at -1.1%, which was expected to be -0.5% for the month. The fact that it was lower than expected suggests that, perhaps, industrial production is starting to slow down a bit in the United States. This figure also includes transportation, so it would have been somewhat distorted by the problems that Boeing has. But at the end of the day, it is a very international number, in the sense that there are a lot of huge exports figured in these companies.

the market is starting to be made aware of the global slowdown and, perhaps even worse, the American one

The Core Durable Goods Orders month-over-month figure was also a mess, coming in at -0.3%, as opposed to the expected -0.2%, for the month. This also suggests that perhaps the market is starting to be made aware of the global slowdown and, perhaps even worse, the American one. Furthermore, there was a revision of the previous number from 0.5% to 0.3%, showing a deceleration over the last 60 days.

Is America an island?

There are some economists that feel that the United States is a bit of an island when it comes to the global economy, as the US has a massive amount of dynamic influence in both directions. Ultimately, this is the overall question, but it does appear that the global situation with slowing down is starting to affect what’s going on in America.

This is a question that comes up every time there seems to be a global recession, and now it appears that it is being answered. Ultimately, this market should continue to see a lot of problems around the world, and that should continue to push these numbers lower.

Furthermore, this could signal that the US economy is starting to slow down. That could work against the value of the US dollar and influence what happens next with the Federal Reserve. While it is already known that a rate cut is coming in October, the question is for the overall outlook going forward. The market participants will probably continue to look at this as a scenario that could muddy the outlook for the United States.

The stock market could take a bit of a hit, but if the Federal Reserve is aggressive enough, it’s very likely that the increased liquidity could fuel equities even higher. All things being equal, it looks as if cracks are starting to appear in the United States, just as we have seen around the world.

Written By
Alan Penny

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