The 'Helicopter
Economics Investing
Guide' is meant to help
educate people on how to
make profitable investing
choices in the current
economic environment.
We have coined this term
to describe the current
monetary and fiscal
policies of the U.S.
government, which
involve unprecedented
money printing. This is the
official blog of the New
York Investing meetup.
Economics Investing
Guide' is meant to help
educate people on how to
make profitable investing
choices in the current
economic environment.
We have coined this term
to describe the current
monetary and fiscal
policies of the U.S.
government, which
involve unprecedented
money printing. This is the
official blog of the New
York Investing meetup.
 | |  | |  | |  |
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July Durable
Goods Add
Support to
Recession View
Montgomery
08/25/2010
Goods Add
Support to
Recession View
Montgomery
08/25/2010
After an existing home sales report yesterday revealed that the U.S. housing
market is currently in worse shape than it was at the bottom of the Credit
Crisis/Great Recession, July's durable goods report today further confirmed
that the U.S. economy is sinking into a recession.
The headline number, an increase of 0.3%, seemed OK if not particularly
good. Only a single item, a huge 76% increase in commercial aircraft sales,
was responsible for keeping the number above zero however. Durable goods
orders ex transportation fell 3.8% in July. The transportation number,
particularly the aircraft sales component, is highly volatile. A strong number
one month can be followed by a very negative number the next month. As
for the rest of the components of the report, some were eyepoppingly bad.
Machinery orders, which fell 15%, were the weakest number in the report. It
wasn't just the extent of the drop that made it so awful, but more importantly
it was the biggest decline on record. Yes, the drop was larger than the
decline that took place at the bottom of the Credit Crisis/Great Recession
when the U.S. economy was falling off a cliff. Computer orders were down
12.7%. Capital goods orders were down 8.0%, the biggest drop since January
2009, just after the Credit Crisis/Great Recession bottom. Orders for electrical
equipment and appliances were down 5.9%.
Altogether, July durable goods orders indicate that the manufacturing sector
of the U.S. economy is rapidly turning south. This is particularly troubling
because it was manufacturing that had the biggest upturn in the last year
(the four times larger service sector didn't improve nearly as much). What will
provide economic growth, now that manufacturing is weakening? An even
more important question is: If some of the manufacturing numbers are as bad
as or worse than the bottom of the Credit Crisis/Great Recession and this is
also true of the real estate market, how is it possible that the U.S. economy is
not currently in another recession?
Disclosure: No positions
market is currently in worse shape than it was at the bottom of the Credit
Crisis/Great Recession, July's durable goods report today further confirmed
that the U.S. economy is sinking into a recession.
The headline number, an increase of 0.3%, seemed OK if not particularly
good. Only a single item, a huge 76% increase in commercial aircraft sales,
was responsible for keeping the number above zero however. Durable goods
orders ex transportation fell 3.8% in July. The transportation number,
particularly the aircraft sales component, is highly volatile. A strong number
one month can be followed by a very negative number the next month. As
for the rest of the components of the report, some were eyepoppingly bad.
Machinery orders, which fell 15%, were the weakest number in the report. It
wasn't just the extent of the drop that made it so awful, but more importantly
it was the biggest decline on record. Yes, the drop was larger than the
decline that took place at the bottom of the Credit Crisis/Great Recession
when the U.S. economy was falling off a cliff. Computer orders were down
12.7%. Capital goods orders were down 8.0%, the biggest drop since January
2009, just after the Credit Crisis/Great Recession bottom. Orders for electrical
equipment and appliances were down 5.9%.
Altogether, July durable goods orders indicate that the manufacturing sector
of the U.S. economy is rapidly turning south. This is particularly troubling
because it was manufacturing that had the biggest upturn in the last year
(the four times larger service sector didn't improve nearly as much). What will
provide economic growth, now that manufacturing is weakening? An even
more important question is: If some of the manufacturing numbers are as bad
as or worse than the bottom of the Credit Crisis/Great Recession and this is
also true of the real estate market, how is it possible that the U.S. economy is
not currently in another recession?
Disclosure: No positions