US Durable Goods Shows Rising Concern

Alan Penny

23 December 2019

3 min read

dollar notes under US flag

  • US Core Durable Goods Orders month over month flat
  • Durable Goods Orders month over month much lower than anticipated
  • Market may react to light volumes recorded in 2019 by January 2020

The United States released a couple of economic figures during the trading session on Monday in what will be a very light week when it comes to economic information. As it is the holiday week, most volume will be very anemic, and these are numbers that traders will keep an eye on but may not react to until January. As the announcements were relatively soft, it’s yet another sign that perhaps the United States economy is starting to struggle more than originally thought.

The announcements

The announcements released on Monday were the US Core Durable Goods Orders month over month for November, coming out at 0.0%, instead of the expected 1.5% by the markets. Durable Goods Orders month over month were also released, coming out at -2.0%, as opposed to the 0.2% expected by the market. This shows that large manufacturers are starting to slow down, just as the consumer is.

This is the worst set of numbers in over six months for the Americans

This is the worst set of numbers in over six months for the Americans, and this will have a certain amount of overhead when it comes to the markets. But at the same time stock markets themselves have been running on the Federal Reserve announcements more than anything else over the last decade or so.

As economic figures have been much cooler than anticipated recently, it’s very possible that the trading community will start to suggest that perhaps the Federal Reserve will come back into play, doing more quantitative easing. In fact, there are pundits already suggesting that there will be a couple of interest-rate cuts during 2020, but right now in the short term, it appears that the Federal Reserve isn’t quite ready to move. However, this is just the latest in several disappointing economic figures coming out of the United States, and that certainly will not go unnoticed.

The markets going forward

It is very possible that stock markets will continue to rally though, because people will be looking for “cheap money” coming out of the Federal Reserve. Beyond that, you could also see a scenario where gold will rally as well, as it has been beaten down for some time and seems to be fighting a significant support level underneath.

In general, the pattern of disjointed stock markets that we have been dealing with over the last six months or so will continue, where both “risk on” and “risk off” assets can rally at the same time.

The market reaction to the announcement so far has not been overly dramatic, but it should be noted that volumes are extraordinarily light given it’s December 23. The real reaction may not be felt until January 6, when most traders get back to work together with high-volume trading. Nonetheless, this is yet another ominous sign for the US economy, which could lead to talk of massive swings in expectations coming out of the Fed.

Written By
Alan Penny

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