Another Durable Goods Debacle, This Time Masked By Boeing Order Deluge
The headline September Durable Goods number was great: rising at 3.7%, this was well above the August revised 0.2% increase and far above expectations of a 2.3% increase. However, a quick glance into the reasons shows why the reality is - once again - far uglier. Actually, the reason is just one: Boeing, which reported 127 plane orders in September compared to just 16 in August. This translated into a 57.5% monthly increase in non-defense aircraft orders in September (and Syria's contribution can't be denied either, leading to a 15.2% increase in defense airplane orders). So what does the US capital spending climate look like when stripped away from very volatile (and very cancelable) Boeing orders? In a word ugly: Durable Goods ex transports actually declined by -0.1, on expectations of a rebound to 0.5%, following an even more downward revised August print of -0.4%.
But aside from the broader durable goods, and focusing on pure CapEx, in the form of Capital Goods Orders non-Defense Shipments (not so much order which too can be canceled), it is here that we get yet another validation of our thesis from early 2012, namely that the Fed has killed all corporate CapEx-driven growth.
Cap Goods orders declined -1.1%, from a sharply downward revised 0.4% (was 1.5%) in August and wildly missing expectations of a 1.0% increase: this was the third consecutive miss in a row in this series.
As for the shipments: at -0.2%, sliding from a downward revised 1.1%, and also missing expectations, this was the 6th miss in the Shipments category in the past 7 months. So much for any hopes of a recovery.
But wait until we get the October print when the government was "shut down" for more than half the month: it is here that the real plunge in Corporate CapEx will arguably be felt and the chart below will look like it suddenly had a downward facing heart attack.
Summarizing the above: with such horrible news, it is impossible for the S&P to not hit a fresh record high today. After all: not only is the Noctaper guaranteed, but the scenario of an increase in QE is becoming ever more likely...
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