unlawful said:
These numbers are NOT indicative of an economy that is "strong, and getting stronger." They're indicative of an economy that is "weak, and getting weaker." They're indicative of an economy that's sinking. And sinking rapidly.
Oh, good grief! In some of your previous posts, you have made at least
some effort to look behind the reported numbers and get some sense of cause and effect and how actual vs. expected has been impacted. This time you have completely ignored the obvious - take a look at the "defense capital goods" component, -64.3%, (a "lumpy" series due to its 'big ticket' items nature, budget-timing vagaries, and capital investment tax incentives, all contributing to a highly volatile series) , and then the "core capital goods" components, -0.4% (considered by many to be a more reliable indicator of trend - following an outsized +5% last month, -.4% is actually pretty darned good).
You have cited briefing.com in most of your posts, hence one would surmise that you at least seem to rely somewhat on their info. So lets take a look at their commentary about the same report that you say suggests an economy that is "sinking rapidly":
Key Factors
* Strong drop-off belies growth ex-trans with big upward revisions to Dec (1.9% from 0.9%).
* Large drop in nondefense aircraft/parts -68.2% and defense -64.3% provide downward direction.
* Transportation orders drop -31.2% after the 32% Q4 surge.
* Non-transportation orders continue to hold gains +0.6% after two months of positive numbers.
* Machinery orders decline -2.5% after the 12% Q4 gain. Computers and electricals edge lower -0.4%.
* Non-defense capital goods orders (i.e. business investment) fell modestly -0.4%.
Big Picture
* Business (capital goods) investment strengthened in 2005 through the end of capital investment tax incentives, the Sept energy price spike and the temporary dip in business confidence. The year ended with orders at 13% yoy and non-defense capital goods orders at a stunning 32%. Briefing.com has a strong 2006 outlook given strong corporate profits, large cash flow, low borrowing rates and underlying business demand. High energy prices offer a partial counter to the strong fundamentals given the potential for crowding out of business investment.
Conclusion: Briefing.com does not agree with your assessment. "Sinking rapidly"? Not hardly.
Durable goods is a very volatile series. Indeed, it is one of the most difficult numbers to forecast with any degree of accuracy. In all cases and with durable goods especially, one month does not a trend make.
This expansion
is getting rather mature as expansions go, so it would not be surprising to begin to see some imbalances showing up here and there. But this ain't one of them. If we see another two or three months (consecutively) of declining durables goods with order backlogs decling; if we begin to see an accumulation of inventories, accompanied by a fall-off in sales, resulting in jumps in the inventory/sales ratio; if we see initial unemployment claims reversing their downward trend and starting to trend higher; if we see the orders and backlogs components of the ISM turning below 50 for two or three months in a row: those, among other things, will give us solid indication that the economy is indeed softening.
Above all else, remember the forecaster's credo: if you
must forecast, you must forecast frequently.