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JPM Says "Disastrous" Durable Goods Number Sets Stage For Sub-1% Q3 GDP Print

Tyler Durden's picture


Fresh from the presses by JPM's Michael Feroli:

A disastrous durables report

The July durable goods report was a major disappointment and raises the risk that third quarter GDP growth prints below 1%. Shipments of core capital goods (ex-aircraft and defense) fell 1.5%, the most since April 2009, and orders for core capital goods plunged 8.0%, the most since January 2009. This category is the most important element of the report as it is the best gauge of business capital spending and it feeds into the calculation of GDP. Other aspects of the report weren't quite as bad: total orders were up 0.3%, which was entirely accounted for by a 76% jump in bookings of civilian aircraft. Total shipments rose a decent 2.2% in July, thanks mostly to an increase in shipments of semiconductors and other electronic intermediate inputs.
Core capital goods tend to be seasonally weak the first month of the quarter, due to excess seasonality in the machinery category. However, even after accounting for that the capital spending implications still look atrocious. In particular, new orders for machinery declined 15%, the most on record going back to 1992. There was a modest upward revision to June core capital goods shipments, which implies that second quarter GDP growth is now tracking 1.2% instead of 1.1%. However, even with that revision core capital goods shipments are tracking a 2% annual rate of decline early in Q3, down sharply from a +18% pace in Q2 and +12% rate in Q1. The downshift in the pace of capital spending is particularly worrying as this was the strongest, most reliable sector of the economy over the past year.

Inventories at manufacturers of durable goods increased $1.8 billion in July, well below the $3.3 billion average increase in stocks over the prior three months--another factor which lends downside risk to Q3 GDP growth.


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Wed, 08/25/2010 - 12:39 | Link to Comment Mr Lennon Hendrix
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Zero growth, bitchez!

Wed, 08/25/2010 - 12:42 | Link to Comment HelluvaEngineer
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Wed, 08/25/2010 - 13:02 | Link to Comment Headbanger
Wed, 08/25/2010 - 13:50 | Link to Comment johngaltfla
johngaltfla's picture

Misunderaffirmativepositiveaffirmation you skanks.

I told you so....


Wed, 08/25/2010 - 14:01 | Link to Comment Ms. Erable
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+14 (syllables)!

Wed, 08/25/2010 - 12:43 | Link to Comment TooBearish
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Lost money A-team continues to stress bottom picking as a solid strategy

Wed, 08/25/2010 - 12:45 | Link to Comment Hungry For Knowledge
Hungry For Knowledge's picture

I'm calling a -15% GDP before this is all over with in coming years, based on the trajectory we're on/slope of decrease.  Sad.

Wed, 08/25/2010 - 12:48 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Once we move from the "bumpy plateau" to the backside of oil production it will be negative (-) 9% the first year.

Wed, 08/25/2010 - 12:54 | Link to Comment Slartebartfast
Slartebartfast's picture

How do you compare GDP numbers if the dollar is abandoned and we have to start up (or try to) a whole new currency?  

This isn't a cycle.  It's a secular change.

Wed, 08/25/2010 - 12:58 | Link to Comment LeBalance
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Wed, 08/25/2010 - 13:25 | Link to Comment masterinchancery
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the new measure of GDP will be Bernanke Bucks, available in handy billion sizes.

Wed, 08/25/2010 - 21:00 | Link to Comment johngaltfla
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Chart gold in Yen...that will still be around when the U.S. implodes.

Wed, 08/25/2010 - 12:47 | Link to Comment Rainman
Rainman's picture

Inventory smackdown confirmed. Like that's a surprise...??

Wed, 08/25/2010 - 12:49 | Link to Comment Mr Lennon Hendrix
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It is one of those days where we say stuff like, "Ima grab me a cold one and some popcorn........"

Wed, 08/25/2010 - 15:44 | Link to Comment Miles Kendig
Miles Kendig's picture

and watch the show....  Thank goodness I stocked up that outside the window cooler with a fresh six pack.

Wed, 08/25/2010 - 12:47 | Link to Comment SimpleSimon
SimpleSimon's picture

Hopium always disappoints after the initial rush.

Wed, 08/25/2010 - 12:48 | Link to Comment Hephasteus
Hephasteus's picture

LOL at the drudge report.

Wed, 08/25/2010 - 12:48 | Link to Comment Helvidius
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Solid B+.

Wed, 08/25/2010 - 12:49 | Link to Comment Comrade de Chaos
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It seems like someone is forced to liquidate shorts. Feels like August 2007 all over again, maybe the rumors of QUANT explosion are true ...  : (((

I smell some profits in the air... and pain.. and profits.. and more pain.

Wed, 08/25/2010 - 12:52 | Link to Comment citizen2084
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As my former first world country slides into third world living standards and authoritarian government, probably not a good time for ITYS...

The "timmy g and fresh benny b" gig might just work! If we can get living standards on par with mehico, than the low paying service sector jobs will raise living standards! 

I finally get it, now I can trade with confidence!




Wed, 08/25/2010 - 12:54 | Link to Comment bigdumbnugly
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well, there goes the old axiom that bad news comes in threes. 

i think we are now in double digits.

Wed, 08/25/2010 - 12:54 | Link to Comment Spitzer
Spitzer's picture

Gold stocks are going ape shit.

Wed, 08/25/2010 - 12:58 | Link to Comment Slartebartfast
Slartebartfast's picture

The stampede to gold is astonishing.  Any idea who is behind it?  I mean, other than "everybody".  China?  China and Russia?  Hmmm.....

Wed, 08/25/2010 - 13:08 | Link to Comment Spalding_Smailes
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China is sitting on ton's of gold.

Wed, 08/25/2010 - 13:15 | Link to Comment knukles
knukles's picture

Goldman is squeezing the living puss out of JPM and HSBC.  Clear as poop on the sidewalk.

Amongst other "things" like the world might as well be coming to an end.

Wed, 08/25/2010 - 13:07 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

Check out (AUU) $2.14... gold miner. If only I did not sell so fast. I'll be jumping back in after this mini-crash brings us to s&p 850-900 then its time to get back in, gulp, i hope ...

Wed, 08/25/2010 - 13:02 | Link to Comment Spalding_Smailes
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Well if they reported the true unemployment (18-20%) maybe this would not shock joe six-pack...

Wed, 08/25/2010 - 13:01 | Link to Comment merehuman
merehuman's picture

viagra didnt work for me either bernie and watering down the drinks didnt help and now they are all leaving the party, whaaaaa..

Wed, 08/25/2010 - 13:04 | Link to Comment cougar_w
cougar_w's picture

One tool in the fight against deflation is disinformation; if you don't have to admit to it, it never happened.

So it's projected as 1% today, to be revised down to 0% when no one is looking, to print as (2%) when the day actually arrives, to actually be (5%) on the street.

It's probably been in the red for the last few months already, but nobody will admit it. It never happened.

Wed, 08/25/2010 - 13:09 | Link to Comment bigdumbnugly
bigdumbnugly's picture

Right Cougar.  like a comment from yesterday...


This revision B.S.

it's like the guy inferring to the new date in casual conversation that he's got the whole 9".

Then as last call is announced and crunch time gets closer he backs off those specs and begins referring to himself as rather as well-endowed.  Certainly better than average at least.

But when the bedroom door finally opens and the final revision is made, someone won't be happy.  But he won't care, when that's done, he's outta there.

Wed, 08/25/2010 - 13:09 | Link to Comment Hang The Fed
Hang The Fed's picture

Hahaha, don't forget that it also helps greatly when your entire system of accounting for things like GDP is god-awfully convoluted that they could claim that GDP "was flat on B#," and no one would blink anymore.

Wed, 08/25/2010 - 13:36 | Link to Comment traderjoe
traderjoe's picture

According to, the entire durable goods series was massively re-benchmarked a month or so ago. Would have given future numbers an upward bias. 

Wed, 08/25/2010 - 13:04 | Link to Comment midtowng
midtowng's picture

Nothing to worry about. I'm sure that the government will soon be buying lots of bombers, and that's all the economy needs to expand.

Wed, 08/25/2010 - 13:17 | Link to Comment Slartebartfast
Slartebartfast's picture

Really.  Got news boys.  CorpGov is flat broke.  Gates is running around shutting down major military commands to try to gin up enough dough to support the attack on Iran.  They's broke.  I bet you we're going to see CorpGov failing to make payments in the next six months. paycheck for you this month soldier.  Whatcha gonna do about it - you're butt is in a foxhole in Afghanistan?

Wed, 08/25/2010 - 14:07 | Link to Comment Millennial
Millennial's picture

That scares me because I joined the military for that purpose. If the govt defaults on my check guess what I ain't fighting and I'm gonna start a mutiny. Generals don't hold the guns, the privates do. 

Either I get my food and shelter or it'll be hard to control my behavior short of jail.


Wed, 08/25/2010 - 14:44 | Link to Comment aerojet
aerojet's picture

My prediction a couple of years back was that the US would be so broke that troops overseas would be stranded and unable to get home by any means other than their families stepping in and arranging transportation.  It happened to the Soviets.

Wed, 08/25/2010 - 15:03 | Link to Comment cougar_w
cougar_w's picture

Oh, that's not even an accident when it happens.

You actually don't want hardened troops returning home to chaos and disfunction. They might get -- you know -- ideas or something. They might take sides. They might try to make some quick cash by hiring out as mercs or heavies in the mob.

The Romans invented the idea of stranding your soldiers in the hinterlands. Let the barbarians marry and reculturate them, if they want to. Back home, we got our own troubles.


Wed, 08/25/2010 - 20:21 | Link to Comment ATTILA THE WIMP

Smoke lots of weed.

Keep your head down.

Don't voulnteer for nuting.

Carry as much ammo already in magazines as you can

When in doubt shoot everything that isn't wearing olive drab.

Steal a frag and save it for any prick lifer that tries to get you killed.

File for PTSD comp as soon as you get out.

Vietnam grunt class of '65 173rd Airborne (welcome to the club, new meat)


Wed, 08/25/2010 - 13:05 | Link to Comment septicshock
septicshock's picture

Can anyone say margin squeeze? Higher cost for commodities, lower price in the store as the consumer is broke. Earnings to tumble, share prices follow, more panic, the cycle can't be stopped. Time to ride this cyclical bear market down like a bitch in heat. Hoorah!!!!

Wed, 08/25/2010 - 13:06 | Link to Comment MrTrader
MrTrader's picture

EUR/JPY starts upward leg. You might guess what this means...RALLY TIME !!!

Wed, 08/25/2010 - 13:13 | Link to Comment WineSorbet
WineSorbet's picture

But the dow is over 10K

Wed, 08/25/2010 - 13:21 | Link to Comment Spalding_Smailes
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Wed, 08/25/2010 - 14:05 | Link to Comment tmosley
tmosley's picture

That was a great year.

Let's all party like it's 1999!

Wed, 08/25/2010 - 13:19 | Link to Comment Slartebartfast
Slartebartfast's picture

Yippee!  We're saved!  Shew!  I thought all that bad talk on CNBC might be true for a minuee.  Hand me the remote baby, Oprah is coming on....

Wed, 08/25/2010 - 13:20 | Link to Comment Slartebartfast
Slartebartfast's picture



Wed, 08/25/2010 - 13:47 | Link to Comment redpill
redpill's picture

DOW about to go green, lol

Wed, 08/25/2010 - 14:00 | Link to Comment Iam_Silverman
Iam_Silverman's picture

That's because all of this news has already been priced into the market.  Now is the time to buy, esepecially those durable-good making companies!


And to think I said that with a straight face.  Maybe I can have a job with CNBC?

Wed, 08/25/2010 - 14:14 | Link to Comment Ms. Erable
Ms. Erable's picture

Just did...

Wed, 08/25/2010 - 13:56 | Link to Comment Caviar Emptor
Caviar Emptor's picture

It's not a "Double Dip". It's the second leg down in the Depression. By definition, the recession never ended according to NBER's guidelines. That's a very telling stat. Since we never recovered the pre-recession GDP peak, it's really a second cascading leg down in a crumbling economy. 

Gold is aiming at records. On top of more imminent money printing, there's global currency instability in the air.

Wed, 08/25/2010 - 15:36 | Link to Comment LongShortSally
LongShortSally's picture

I can't help but believe that this is a set up for Friday's GDP, i.e. that expectations are being lowered so that the reported number can be a "beat". 

Wed, 08/25/2010 - 16:10 | Link to Comment Problem Is
Problem Is's picture

Who sprayed Corexit on the GDP numbers?

Wed, 08/25/2010 - 18:33 | Link to Comment lbrecken
lbrecken's picture

Unreal yet today happens and the russel is almost flat for the year when GDP was suppose to be 3% in 3q 6 mths ago.  Yeh 20% off highs but flat still?

Thu, 09/30/2010 - 03:40 | Link to Comment Herry12
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