Goldman On Durable Goods: Encouraging, But Doubt Recent Growth Rates Will Be Sustained

Tyler Durden's picture

Today's core durable goods number is being desperately spun as yet another inflection point for the economy. Alas, nobody buys it any more. Enter Goldman Sachs, which says that while encouraging, is quite dubious if the "recent growth rates will be sustained." Growth of what? Stainless steel scaffolding for lies and rumors that reach to the sky? If so, then yes absolutely. Otherwise, with China rumored to be gearing up to downgrade the CNY (and finally push Schumer over the cliff), we wish the optimists the traditional dose of good luck with their daily hopium.

From Goldman Sachs

BOTTOM LINE: Total durable goods orders about unchanged, but core orders and shipments up significantly. While an encouraging sign, we are not sure recent growth rates will be sustained.

MAP:
Durable goods orders 0 (4, 0)

KEY NUMBERS:
Durable goods orders -0.1% (mom) in Aug vs. GS Flat, median forecast -0.2%.
Durable goods orders ex-transport -0.1% (mom) in Aug vs. median forecast -0.2%.

MAIN POINTS:
1. New orders for durable goods fell by 0.1% (month-over-month) in August, about as expected. The composition of the report was generally favorable. In particular, "core" capital goods orders (nondefense capital goods excluding aircraft) rose by 1.1%--more than the consensus forecast-and estimates for earlier months were revised up. Core shipments rose by 2.8%, and are now up more than 20% on a three-month annualized basis. The rapid increase in core shipments over the last few months has been concentrated in machinery shipments, which are up roughly 50% on a three-month annualized basis. We will get more details on the drivers of this increase in the August factory orders report (October 4). Although it is an encouraging sign that shipments have not turned over, we doubt that the recent surge in machinery shipments will be sustained, given signs of deterioration in many manufacturing surveys and the fact that machinery orders growth has slowed in recent months.

2. Durable goods inventories increased by 0.9% (month-over-month), pointing to some upside risk to the inventory assumption in our Q3 GDP growth forecast. The inventory-to-shipments ratio in the sector has trended higher in recent months.