Durable Goods Plummet: -3.6% On Expectations of -2.5%; 8% Monthly Swing From 4.4% Prior Print; Ex Transportation Consensus Missed By 2%

Tyler Durden's picture

At this point there is no need to even highlight the stagflationary crunch the US economy has entered, although the just released Durable Goods number seals the deal: -3.6% on expectations of -2.5%, an 8% revised swing M/M! Ex transportation -1.5% with consensus of +0.5% (down from 1.3%). Q2 GDP now trending sub 2%. Absent the BOJ flooding the market with trillions of fresh Yen, QE3 is now inevitable.

From the report:

New orders for manufactured durable goods in April decreased $7.1 billion or 3.6 percent to $189.9 billion, the U.S. Census Bureau announced today. This decrease, down two of the last three months, followed a 4.4 percent March increase. Excluding transportation, new orders decreased 1.5 percent. Excluding defense, new orders decreased 3.6 percent. Transportation equipment, also down two of the last three months, had the largest  decrease, $4.9 billion or 9.5 percent to $46.7 billion.

This even with the now default increase in inventories (which will be liquidated eventually: thank you FIFO/LIFO).

Inventories of manufactured durable goods in April, up sixteen consecutive months, increased $3.2 billion or 0.9 percent to $350.5 billion. This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a 1.7 percent March increase. Transportation equipment, also up sixteen consecutive months, had the largest increase, $1.0 billion or 1.0 percent to $106.1 billion. This was also at the highest level since the series was first published on a NAICS basis in 1992 and followed a 2.4 percent March increase.

From SMRA:

April new durable goods orders were reported down 3.6%, following a revision higher to up 4.4% in March (previously +4.1%). This was near our forecast for down 3.5%. Expectations in a Bloomberg survey centered at a 2.5% decrease. The range was from down 5.7% to up 2.0%. While the decrease is fairly substantial, it needs to be taken in context with supply chain disruptions that had an impact on new orders for a variety of manufactured goods, but particularly for the manufacture of motor vehicles. Also, new orders typically seesaw between up and down months, and this appears to be the case for April.

Transportation orders fell 9.5% in April. Orders for motor vehicles and parts were down 4.5%, and civilian aircraft orders dropped 30.0%. Boeing had a scant two new orders in the month. However, as we noted in our Chart of the Day on May 6, it is not unusual for the number of orders for aircraft to be low in the months in advance of an airshow, and then jump in the week of the show and for a few weeks afterward. The last major airshow was at Farnborough in July 2010, so there may be some pent-up demand to which to look forward.

And so forth. There is no way to spin the data. In other news, the Japanese earthquake may after all end up not being beneficial to global GDP.

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mynhair's picture

Bomb GS now!  Quit wasting the goodies on Libya.

cossack55's picture

If they miss I hope they hit JPM.

Cash_is_Trash's picture

War is not invetible, concentration of power will most likely lead to war.

tmosley's picture

Pretty sure QE3 was always inevitable.  You could tell because the delivery boy and the crack head both said it wasn't going to happen.

Ray1968's picture

yup... that's why the crash of silver was a very temporary thing. Keep your powder dry and your silver close.

tmosley's picture

The spot (paper) price of silver isn't what is important right now.  Only the open interest and the COMEX inventory are important.

The spot price will be important if it starts hitting new highs again, only because it will bring supply onto the market to avert a COMEX default.

The ONLY cure to a shortage is higher prices, as our good pal Jeff Neilson says.  Too true.

Vagabond's picture

70785 2011's left at apmex

tmosley's picture

Wow, that's a bit under 47,000 sold in the last week.

Thank you for the update.

NotApplicable's picture

I just looked at Tulving and saw that he recently changed his inventory from "over 450,000 oz." to 350,000. He has no ASE's in stock, but taking orders (shipping June 6th).

Cash_is_Trash's picture

And the crack head made more money begging on the street corner than the kid with the honest job.

Id fight Gandhi's picture

Is the major consensus at ZH that there will be qe3 immediately after qe2, or will shit fall apart first and to "justify" qe3.

Amazing how bad the data got so fast with qe2 still going.

lizzy36's picture

QE3 will not start until 2012.

There is no political will for it.....YET.

That is so the electorate will go to the polls about the same time as the indices hit new lifetime highs.

I am a Man I am Forty's picture

agreed, and there is plenty of time for the market to head south until then

mayhem_korner's picture


Year or Dow?

I'd take the under on your prediction - don't think they'll make it to Columbus Day...

ElvisDog's picture

I don't know, the Obama administration always seems to do things earlier than you think they would for maximum effect. Killing Bin Laden in 2011 rather than 2012 for example. However, if what you wrote is true, I will be ready for it to take maximum advantage of the dump and pump.

HamyWanger's picture

Why would the Federal Reserve risk a stock market crash and a rise in T-bonds rates when pension funds, the federal gov and Social Security have never been so fragile? Even a 10% correction on the DJIA would wipe out a lot of mo-mo retirement pensions. 

No, QE3 will be announced in August without any "falling down", to the great desperation of stock market bears. 

Nobody thinks QE has created the rise in commodities, except libertarian rednecks. Ask the man in the street, he will blame speculators.

cossack55's picture

As much as I hate to admit it, I think you are spot on, young Master Hamy.

SheepDog-One's picture

'Qe3 will be announced without delay or any market hiccup'....OK Hamy...THEN what? Overnite gold is $1,700, oil is $140, dollar is 65. So what then, start talk of Qe4?

LawsofPhysics's picture

"Overnite gold is $1,700"  - Well I sure hope so.  Stealth QE?  Add a few more zeros, just simply forget to mention it.

ElvisDog's picture

Well, we're going to find out soon enough in just over a month.

Herne the Hunter's picture

Then why is oil at $100? Show me that it was "speculators". That's just a meme that reverberates nicely in the opinion echo chambers.

LawsofPhysics's picture

There will be a delay.  Our "leaders" are not completely inept.  They will begin withdrawing foreign aid and military support, or at least threaten to do so.  It isn't just the sheeple in the U.S. that need to be begging for more QE.  The central planners will make sure that the rest of the world is begging for it too.

SheepDog-One's picture

Oh come on man, Im really gagging on this stuff now. So everything on earth now revolves around trickery and sleight of hand for QE3? Its not going to to any good, no way no how! Theyre tapping a dry well which no one believe in and only cause prices to rise on everything, so whats the point? 'The world will beg Ben to print more imaginary dollars'...whatever.

LawsofPhysics's picture

What, did the world run out of ink or, more importantly, the ability to add zeros to accounts?  Who said anything about dollars?  QE is nothing more than adding zeros in an electronic market.  I am amused by all the comments focused on "paper".  No one is trading paper, everything is electronic.  The dollars have in fact been imaginary for some time now and yet the world has proceeded with numerous rounds of QE.  It will continue, until the physical constraints of supply and demand blow it all up.  Just saying, we have room to move on the latter.  Maybe the plan is to blow gold, silver, oil, and all commodities to super high prices (they want inflation right) despite a real shortage in the physical world so that some new "emergency measures" can be enacted.  Just saying, don't underestimate the possibilities here.  Chance always favors the prepared mind.

SheepDog-One's picture

And adding more zero's fools who?

LawsofPhysics's picture

Who cares, the point is that it hasn't stopped.

ElvisDog's picture

But sheep dog is right. The whole reason behind all of the QE's was this idea that it would pump-prime private sector economic activity into a self-sustaining cycle of growth. It's pretty clear that in that respect QE has been a failure. QE3 will do nothing to generate real economic activity and real wealth. Adding a zero to our bank accounts changes nothing.

LawsofPhysics's picture

It changes nothing until the money gets spent into circulation, then there will most certainly be an effect.

But you are correct in regard to the massive misallocation of capital that has occurred via all this QE.  The Fed is indeed out of "traditional" options.   Ergo, what comes next will most definitely be unexpected.

Mec-sick-o's picture

Japan's earthquake is a small glimpse of what will happen.

There will be shocks and aftershocks in the productivity chain.

Those depending on just in time chain or globalized consumable goods will be having the pains.

LRC Fan's picture

Not to speak for anyone else here, because there are much brighter/sharper guys than me, but I have shifted my own thinking in the past 2-3 weeks.  I used to think there would be some kind of lull between QE2 and QE3, but now I think things have gotten so bad that they can't afford to risk it.  If a few months go by and there is no QE3 announcement, things might simply collapse completely.  The Dow might plunge 75% in a few days, or something from out of left field such as a new earthquake/terrorist attack that could turn everything upside down.  They might lose control.  Right now they are still firmly in control, and can tank things in the next few weeks to justify QE3 before things get worse.  Either way they are fucked.  If QE3 is announced in the next month, silver and gold probably double by year end.  If not, the Dow will completely tank.  Pick your poision, either way QE3 4 5 6 7 8 is coming.  Of course there are always surprises when dealing with these douche bags, so who knows what will happen.  Maybe the Euro will completely collapse.  Maybe Korea decides to attack the US.  Maybe Obama's birth certificate is a fake.  Maybe the debt ceiling isn't raised.  Who the fuck knows what tricks they will pull to distract everyone from all the monetizing that has happened and is coming. 

SheepDog-One's picture

So then announce QE3 of what, $2 trillion at least and what does that get them? Higher prices higher oil lower dollar. So day after QE3 what happens, promises of QE4 come? At some point soon, the total insanity must stop.

LawsofPhysics's picture

The Fed wants higher prices and a weak dollar.  Now I am confused, are you arguing for more QE or not?

SheepDog-One's picture

Well I dont care what the FED wants, Im not looking at it from the viewpoint of the maniacal monetizers.

ElvisDog's picture

My dream scenario is just what you wrote - there is a delay in QE3, the stock market crashes, ElvisDog takes a large position in the S&P 500, QE3 is launched, stock market doubles.

LawsofPhysics's picture

My hope as well.   At the end of the day, unless you are a VC guy, the song remains the same, buy low and sell high.

MachoMan's picture

The issue is not the official announcement, but the manipulation of perception.  If they can get everyone to bail and attempt to get ahead of the lack of an annoucement of QE3, then they can probably start QE 3 on the heels of QE 2... 

mayhem_korner's picture

Keep in mind there is a delay in the impact of QE.  So the current economic data is reflective of the early stages of QE2, compounded by abysmal fundamentals that it tried to paper over. 

Full effects of QE2 are still in the pipeline, aided and abetted by Fukishima and the Euro meltdown.  USD could stand to look safe relative to Euro for a stretch, but the card house is a wobblin'.


lizzy36's picture

Yeah, that going to leave a transitory mark.

#brown shoots.

PaperBear's picture

Everything indicator for the economy of the USA is rolling over after zero interest rates for 18 months and all the various QEs.

The federal reserve have no other bullets to fire other than another round of QE.

And who fancies another foreign war now ?

expectplannedevents's picture

oh and they can't raise interest rates..

car burrowers, homeowners and students would be f"ed.. not good for business either.

slaughterer's picture

No need for QE3, just let's let the USA default.  Greece will provide the model this summer for us.

writingsonthewall's picture

he who defaults first - gains most.

Cassandra Syndrome's picture

I hope Keynes can see this from the 9th Circle of Hell.


writingsonthewall's picture

How do you blame Keynes?

The USA only relied on Keynesism after the crisis had started! If you think Keynesism is a solution to captialist crises - then you're wrong I'm afraid.

With Keynesism you would have been saving during the boom by paying down Government debt - as opposed to starting wars, taxing less and spending more.

Keynes advocated spending during the busts and saving during the boom - the Government acting a bit like an Uncle who you helps you out when you're unemployed.

For such scholars of economics there are some serious gaps appearing.


What the US has experienced is 'Monetarism on the way up and Keynesism on the way down'. A cobination almost guaranteed not to work.


Typical Monetarists - they claim their system is king throughout the boom - but then expect another system to take the blame when it inevitabley collapses.

Friedman has you all fooled.

mayhem_korner's picture

The crisis started nine decades ago, Mr. Fozzy, sir.

It's been Keynesian from the beginning, with an accelerant of easy monetary policy in the past three decades.

Rodent Freikorps's picture

Didn't Keynes expect nations to pay off debt during the good times?

Seems like a large error.

Confucious 222's picture

The Fed needs to step up its War on Savers and wipe them out once and for all.


I am a Man I am Forty's picture

yep, banks need to make sure they never allow a return on cash or cd's, starve the responsible, but will they will charge 29.99% on credit cards and leverage ur cash 10 plus to 1

gulf breeze's picture


Post a momo chart of RL.  lol