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Sign the already weak the goods sector weakens.
Boeing, where are you? Boeing is suffering from a sharp drop in orders, which translates into a sharp drop in orders for "civil aircraft" in the durable goods database released this morning by the Commerce Department. But it's not just Boeing. Broader and deeper, GDP growth forecasts for the second quarter have been reduced to nil.
Durable Goods Orders – like cars, appliances and other items designed to last at least three years – fell 2.1% in April from March to $ 248.4 billion (data seasonally adjusted), and were down slightly from april last year, the first year-to-year decline since January 2017, which was the end of the two-year decline in the US goods-oriented sector.
In the graph above, the historic increase in orders in July 2014 was caused by Boeing, which announced a massive order for 324 aircraft during the month.
The decrease in orders in April compared to last year is after February and March was essentially stable compared to the previous year. It has been three months in a row with no growth compared to the same period last year. And the order data for March was still unaffected by the Boeing fiasco that had just begun.
Shipments of durable goods – goods that had been ordered in prior periods and shipped in April – decreased 1.6% in April from March to $ 253.3 billion. They recorded a fairly steady decline since their December peak. Thanks to the strength of last year, shipments in April are still up 3.2% year-over-year.
This chart shows the percentage change from one year to the other of shipments. Note the period of 2015 and 2016 – the "transportation recession" – as a drop in shipments causes a decline in the transportation sector. At the time, for 2016, GDP grew by only 1.6%:
Further analyze durable goods orders:
- Excluding transportation, so without the Boeing fiasco, orders stagnated in April compared with March, but remained up 1.4% from one year to the next.
- Excluding defense, orders declined 2.5% over a month and nearly 2% from April of last year.
The forecast for GDP growth is reduced to nothing.
After the release of these data, GDP growth forecasts for the second quarter were reduced, including here, cited by Bloomberg:
- JPMorgan Chase at 1.0% (2.25%)
- Barclays Plc at 2% (versus 2.2%).
- Oxford Economics at 1.3% (vs. 1.6%).
Nowcast of the New York Fed, which is reported each Friday, was lowered by 38 basis points today, to reach a growth of 1.41% (against 1.79% on May 17), after having already been lowered by 41 basis points the last week (compared with 2.2% on May 10th). This is a reduction of 79 basis points in just two weeks:
In today's fall of the New York Fed's forecast, Nowcast integrates durable goods data, including manufacturers' inventories, unfilled orders, deliveries and new orders. The drop in shipments (second chart from the top) was at the origin of 23 basis points of the 38 basis point cut today.
In addition, the drop in new home sales recorded yesterday took off 4 basis points.
GDPNow from the Atlanta Fed provides another point of view. Today's release reached 1.3%, up from 1.2% on May 16th.
It's still very early in the quarter. We are digesting the April data. May and June data require patience. So, this quarter can still turn around, just like the first quarter did after a very ugly series of first data points. These solid data appear faster, given the data collected so far. However, the May Purchasing Managers' Indexes (PMI) for services and manufacturing that we received yesterday do not give a promising picture.
These PMIs posted the lowest growth in orders since October 2009. Read more … Sudden dive in service sector growth in the United States, manufacturing sector is even weaker
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