Was The Disappointing Paris Air Show A Harbinger Of Another Durable Goods Disaster And More Economic Weakness?
Remember when car sales where supposed to boost industrial production when all they did was boost GM's dealer channel stuffing to a new all time record? Today, courtesy of Stone McCarthy we transpose the observation about what is really happening in the car space (i.e., not adding to GDP) to airplane orders as an indication of how airlines view the future of the global economic "recovery." Boeing, which recently completed its stint at the seminal Paris air show, reported just 48 orders in June. This is the worst air show showing for the bellweather airplane maker in the last 6 years with the exception of 2009 when the global economy was in freefall. Bottom line: upcoming durable goods reports will likely be weaker than expected due to a drop in Boeing bookings, and while this is a volatile series, it ultimately is money that enters, or not as the case may be, the US economy. More importantly, if the Paris Air Show is any indication, one can write off the thesis of increased infrastructure CapEx spending in H2. So much for the hockeystick economic growth in the second half of 2011.
Charting Boeing orders vs. Air Shows:
More from SMRA:
On June 20-26, the Paris Air Show, held every two years, took place. The potential for a significant number of aircraft orders is always present in the aftermath of an air show. So how did Boeing fare at the Paris Air Show? Comme ci, comme ca.
For the month of June, Boeing reported unit orders of 48 aircraft versus 27 units in May, which is a mediocre result in our opinion. Although aircraft orders should help provide a positive boost to June durable goods orders (our forecast is +0.7%), this year's boost won't be quite the knockout punch we were hoping for.
If we discount the previous Paris Air Show held in June 2009 due to the recession impact (just 20 orders for Boeing in June 2009), orders were considerably higher in past years: June 2007 = 132 orders, June 2005 = 162 orders, June 2003 = 73 orders, and June 2001 = 11 (recession impact again for 2001).
So much for infrastructure capex spending and business optimism about the future.