No CapEx Recovery: Durable Goods Disappoint As Capital Goods Orders And Shipments Decline

Tyler Durden's picture

Back in April 2012, before the topic of the Capital Expenditures crunch was even touched by the mainstream media, we penned "How The Fed's Visible Hand Is Forcing Corporate Cash Mismanagement" in which we explained why as a result of faulty Fed policy corporations are dumping all their excess cash in dividends and buybacks, and which "means far less cash left for SG&A, i.e., hiring workers, as temp workers is the best that the current "recovering" economy apparently can do. It also means far, far less cash for CapEx spending. Which ultimately means a plunging profit margin due to decrepit assets no longer performing at their peak levels, and in many cases far worse." Since then, virtually everyone has jumped on the "lack of CapEx" bandwagon. Alas, in today's Durable Goods report we got yet another confirmation that over a year and a half ago we were once more right: there is simply no capex growth in the Fed's centrally-planned New Normal.

While the Census Bureau disclosed that headline Durable Goods declined in October by 2.0% (and much more on an unadjusted basis), this was in line with expectations, and was driven by an unexpected -15.9% collapse in new aircraft orders, driven by Boeing which had a 60% drop in orders, down from 127 to only 79 for the month. However, the big surprise was in the ex-transport durable goods number, which declined by -0.1%, crushing expectations of a 0.5% increase and down from last month's revised +0.2%. In other words, the modest rebound in orders in late summer now appears to have been purely a function of channel stuffing, which now has to work its way through the system, as manufacturing with unfilled orders dropped by a whopping -3.1%.

The sharp downward inflection point in both sets of order books can be seen clearly in the two charts below:

It will get much worse in November if there is no pick up in orders as the Y/Y will once again trend down to the unpleasant 0% number.

But the punchline was in the Core CapEx data set: the Capital Goods orders non-defense ex transports, which shocked everyone by dropping -1.2%, once again leaving the consensus estimate of a 0.8% increase hanging, and is the fifth consecutive miss in a row!

Finally, the capex shipments also declined by -0.2%, putting a nail on all those stories which predicted, as they do every year, that this year will finally be the year in which US corporate capex spending picks up. It did not. And 2014 will be no different either, when dividends and buybacks dominate, to the detriment of actual investment in labor and the long-run. Thank you activist investors.

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I am Jobe's picture


Can you please post some WMT shoppers ? 

GetZeeGold's picture



There's a website dedicated to it.....knock yourself out.

Manthong's picture

‘sno big deal.

CapEx will return to the country after the financiers that run the MIC and the Congress import another few dozen million low enders and we have a labor force with wages that are lower than ‘Nam.

I am Jobe's picture

LOL. The faces of Amerika at it's best. One can never get enough entertainment from the so called Developed Country such as USSA


NOZZLE's picture

Yeah, Walmart Shoppahs channel stuffing whydscreens in multiple shopping  carts for the media to photograph. 

Sufiy's picture

 Shellbomb announcement from China about its new policy towards reserves and Yuan appreciation are still making its rounds under the mainstream media radar. Once they sink into the market the inevitable QE Taper will be questioned again, particularly when people will remember that markets can Go Down As Well. No Bears are left in the Equity markets and No Bulls are left in the Gold market - everything is set up for the big surprise as usual. What will trigger that surprise? Maybe the chart below with the NYSE Margin Debt can give us some clues. Please note that Margin Debt Amount normally peaks before the Stock Market. Any move towards Taper will raise Interest Rates and we can have the Top in Margin Debt very soon if not already.

Sudden Debt's picture

The most important point out of China that I found but nobody really spoke about is that the Chinese have now printed more than enough Yuan's and stored them into their banks to actually meet the volume demand a reserve currency needs.

And they've got the gold to back it.


SheepDog-One's picture

Go 'way! Makin' da turducken!

Sudden Debt's picture



I voted for caramel... that bastard has this stupid grinn on his face...


1835jackson's picture

So long as they print the marekts will go up regardless of the dismal fundamentals. The only report that matters is the FOMC interest rate decision and the FOMC mintues. Everything else is either bullshit or bullshit.

yogibear's picture

Banks are going to be pushing the QE cheap money somewhere. That hot cheap money is being poured into stocks.

yogibear's picture

More subprime auto loans, just have to be alive to be approved.


disabledvet's picture

still doesn't account for the explosion in oil production within North America nor with the trade figures although maybe the continued high price of "the goo." I just don't think Wall Street is "running this according to script." In other words capital is finding it's way into the economy still and far from under investment you're getting over investment...tip it all off with a liberal smattering "jobless prosperity" and I still think you have a broad based deflation scenario being played out "over the long haul" with default risks looming large. It's not that the Fed didn't do the right thing here (back in 2008) but that there is a limit to what it can do to get the private sector to "pay for it all." the Keynsian argument...that it even exists "via bailouts of Wall Street" (a "wealth effect" for Government???!!) is so ridiculously on display right now I think we can simply ignore that entire "religion" for the time being. What is interesting is the rise of State Banking and the possibility for asset sales "writ large" as the American Sovietski experiment simply fails. Marshal McLuhan famously said "you know nothing of my work!" And clearly the USA has learned nothing vis a vis the rise and fall of the Soviet Union. on the good side at least a private sector still exists. The bad side looks like the whole thing is based on over inflated prices for energy. If that "patch" rolls over (it already has in coal which is the most efficient source of thermal energy creation on earth) then I think avoiding "other Detroits" will be a major challenge going forward. Government at the Federal level looks set to become a lot smaller to me.

SokPOTUS's picture

....and, the 50% Bonus Depreciation rules from the 2009 'stimulus' expire on December 31, 2013; never to return.  So these crashing CapEx numbers you are seeing constitute the 'mad rush' to Buy-Buy-Buy! machinery and equipment before the end of the year.  As of 01/01/14; the Abyss awaits....

hound dog vigilante's picture

CapEx has been dead/stagnant since 2006.  Can we stop with the quarter-to-quarter hyperanalysis and start recognizing the macro environment for what it is - a 6+ year-long economic depression.

All this short-term up/down bullshit is borderline Pollyanna ignorance.