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Chart Of The Day: Continued Collapse In Capital Goods New Orders Confirms US Is In Recession

Tyler Durden's picture


While the just released Durable Goods orders report for October came in modestly better than expected (which many thought would be a decline due to Hurricane Sandy), the primary driver of this continues to be record durable good inventory accumulation. Excluding the noise, and focusing only on real, non-noisy economic strength metrics such as New Capital Goods Orders (technically defined as the year over year change in Non-Defense Capital Goods Excluding Aircraft), a very different and far uglier picture emerges. In fact, the October Y/Y Plunge of -8.1% in this major indicator was the biggest drop since 2009.

Curious where this collapse in New Orders is in the context of prior recessions? Here it is (shaded areas indicate NBER-defined recessions). We have never had such a steep drop in Cap Goods in the past 30 years without a concurrent recession.

To summarize: according to one of the least susceptible to manipulation indicators of US economic strength and growth, the US economy is now in a recession.

Source: St. Louis Fed


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Tue, 11/27/2012 - 12:19 | 3014391 dolph9
dolph9's picture

Even a recession or a depression won't feel like it until it hits you personally, like being diagnosed with an illness.

America is still rich, alot of people can still muddle through or do ok.

But make no mistake, we are on slow motion (but fast historically) collapse in this country.

There's only so many hits any person or society can take before they go down.  America just keeps on taking hits, they keep on coming, from all angles.

We are not invincible, and not immune to the iron laws of nature or history.

Tue, 11/27/2012 - 12:40 | 3014448 swmnguy
swmnguy's picture

+1.  Very perceptive post.  This couuntry is astonishingly rich and powerful.  There's so much wealth here it boggles the mind.  The kicker is that the threshold cost, the price of entry, is very high.  In Minneapolis, where I live, it costs at least $30,000-cash money net, not gross-to keep a family of 4 living indoors and not malnourished, with basic transportation etc.  That's above the median income from a median job, net-net.  The cost of living is sneaking up compared to incomes, if only because a gallon pail of ice cream is now 3.5 qts., etc.

People are getting the "frog in heating-up water" treatment.  They can't quite put their finger on why things aren't working the way they used to, but they can tell things ain't the same as they was.  They can muddle through or do ok for a long time.  It helps perceptions that instead of bread lines and soup kitchens, which were very visiible, we now have direct deposit of EBT and SNAP, which is virtually invisible. 

There will come a time when a critical mass of people simply can no longer afford a basic neceessity, and then it will get flashy and interesting.  I think Obama thinks the first key pinch point will be health insurance, which would explain the (outrageously flawed--subject for another thread) attempt at dealing with that looming debacle.  I think he's right that health insurance wiill be the next thing large numbers of people can no longer pay for.

We have a much larger capacity to take hits than anyone could comprehend.  But it's not infinite, and we're reaching numerous tipping points.  Rome was uck-fayed a long time before the Visigoths showed up.  But there were probably perma-bulls in 400 AD.

Tue, 11/27/2012 - 13:21 | 3014547 NidStyles
NidStyles's picture

Inflation starts off slow, and picks up speed the longer it goes along. What we are seeing are the first vestiges of initial noticeable take off period. Once it becomes an obvious thing, it's already too late, because then it's already taken over whatever may have been left of the market price system. 

Tue, 11/27/2012 - 15:37 | 3015039 swmnguy
swmnguy's picture

It's the timing that's the hard part.  The vast wealth of this country seems to provide a lot of cushioning.  I've been consistently wrong in guessing when it would become an obvious thing and thus too late.  At least I've been guessing pessimisticly, so the surprises at being wrong have been happy surprises.  To this point.

Tue, 11/27/2012 - 16:22 | 3015177 Future Jim
Future Jim's picture

How much would a gold standard fix?

Tue, 11/27/2012 - 13:57 | 3014666 StoleYourMoney
StoleYourMoney's picture

Don't worry, Cramer says everything's fine.

Tue, 11/27/2012 - 14:34 | 3014788 kchrisc
kchrisc's picture

The Chucky E. Cheese comments above are classic!

Anyways, does anyone know how they manufactured the spike in the Y/Y Non-Def. Cap. Goods chart? They were even able to overshoot and get it up to its 2005 trendline before the floor/quicksand began to take over.

Tue, 11/27/2012 - 19:57 | 3015873 overmedicatedun...
overmedicatedundersexed's picture

if you want to see where we are: view the movie "THEY LIVE"..the tent city the black vs white symbolic fight the symbolic ruling "Reptiles" hidden from common view..all done in b movie hype by J carpenter..who has not yet been brought to justice, clever man. PS the movie is available on Line for 0 obuma bucks..

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