Durable goods orders drop for 4th month out of last 5

Rick Moran
Bad news all around for American factories. Two leading indices have dropped for the 4th time in 5 months while last month's dismal numbers have been revised downward.

Bloomberg:

Signs that U.S. manufacturing is faltering emerged from a report Friday that orders for long-lasting factory goods, excluding the volatile transportation category, fell in July for the fourth time in five months.

Overall orders for durable goods rose a seasonally adjusted 4.2 percent in July, the Commerce Department said. But excluding aircraft and other transportation goods, orders dropped 0.4 percent.

Durable goods are items meant to last at least three years. Orders for so-called core capital goods, a key measure of business investment plans, fell 3.4 percent. That's the biggest drop since November and the fourth decline in five months. And June's figure was revised down to show a drop of 2.7 percent -- much worse than the initial estimate of a 1.7 percent fall.

"This is a very weak report," Paul Ashworth, an economist at Capital Economics, said in a note to clients.

Core capital goods include computers, industrial machinery and steel. The steady decline in such orders suggests that companies are worried that the economy will slow and are reducing investment. Europe's financial crisis has pushed that region to the brink of recession, threatening exports of U.S. goods. Economies in China, India and Brazil are also growing more slowly.

The manufacturing sector is a much smaller component of the overall economy than it used to be, but is the most sensitive employment wise to downturns. Factory jobs are usually the first to show improvement when coming out of a recession and the first to show decline when a downturn looms. These numbers are worrisome, but surprisingly, overall factory employment has remained fairly steady over these last few months. This may mean we can avoid a double dip recession - as long as we avoid the fiscal cliff next January.

Bad news all around for American factories. Two leading indices have dropped for the 4th time in 5 months while last month's dismal numbers have been revised downward.

Bloomberg:

Signs that U.S. manufacturing is faltering emerged from a report Friday that orders for long-lasting factory goods, excluding the volatile transportation category, fell in July for the fourth time in five months.

Overall orders for durable goods rose a seasonally adjusted 4.2 percent in July, the Commerce Department said. But excluding aircraft and other transportation goods, orders dropped 0.4 percent.

Durable goods are items meant to last at least three years. Orders for so-called core capital goods, a key measure of business investment plans, fell 3.4 percent. That's the biggest drop since November and the fourth decline in five months. And June's figure was revised down to show a drop of 2.7 percent -- much worse than the initial estimate of a 1.7 percent fall.

"This is a very weak report," Paul Ashworth, an economist at Capital Economics, said in a note to clients.

Core capital goods include computers, industrial machinery and steel. The steady decline in such orders suggests that companies are worried that the economy will slow and are reducing investment. Europe's financial crisis has pushed that region to the brink of recession, threatening exports of U.S. goods. Economies in China, India and Brazil are also growing more slowly.

The manufacturing sector is a much smaller component of the overall economy than it used to be, but is the most sensitive employment wise to downturns. Factory jobs are usually the first to show improvement when coming out of a recession and the first to show decline when a downturn looms. These numbers are worrisome, but surprisingly, overall factory employment has remained fairly steady over these last few months. This may mean we can avoid a double dip recession - as long as we avoid the fiscal cliff next January.