There wasn’t anything new or surprising in the advance durable goods report. Shipments (ex transportation) were flat and orders were up 1% year-over-year (NSA). Capital goods (non-defense, ex aircraft) shipments fell 3.4%, the tenth straight month of contraction, while new orders were down again (2.6%) for the sixteenth time out of the past nineteen months. The slump only continues.
With last month’s benchmark revisions, however, we have a much better view of the overall slowdown. It increasingly appears as if there were not separate slumps divided by a late 2013/early 2014 rebound but rather a single, unbroken mess. The removal of the upward resumption in especially 2014 leaves the trajectory mostly flat, with minor deviations around that baseline. In late 2012, that was slightly negative, followed by only slightly positive until the ‘rising dollar’ and now slightly negative once more. This pattern is consistent in each of these segments, durable goods and capital goods, shipments and new orders. That means the current ‘cycle’ can be no cycle at all – it is something altogether different.
Part of the problem in appreciating the weight of observation in this regard is its sheer length in terms of time. Regardless of where you mark its exact beginning, the slowdown defies all sense of proportion; or even economic sense itself. The Great Recession was largely recognizable as all prior recessions in its familiar ‘V’ shape. The dot-com recession is the only cycle that also significantly deviates from the norm; but almost in reverse of the current predicament.
This post was published at David Stockmans Contra Corner on June 24, 2016.
Recent Comments