Durable Goods Big Miss -4%, Expected -1%, Biggest Sequential Drop Since January 2009

And so the transition to the QE3 "economic disappointment" regime begins. Because after the ECB is done with the LTRO it's over for global QEasing, and the Fed is next. Remember- Bernanke's semiannual testimony to Congress is tomorrow. Whatever will he say....

  • Headline Durable Goods plunges from +3.2 to -4% on expectations of -1%
  • More painfully, Durable goods non-defense ex aircraft down a whopping -4.5% on Exp of -1.3%, down from +3.4%.

Digging between the numbers, via Bloomberg:

  • Decline in shipments of non-defense capital goods, ex. aircraft, suggests “weak business investment” for 1Q GDP report, says Bloomberg economist Rich Yamarone  
  • Overall decline "mostly" due to contraction in civilian aircraft orders, "slightly" slower pace of new motor vehicles bookings, defense orders, says Bloomberg economist Joseph Brusuelas   
  • Slowdown ex. transport "consistent with the broader slowdown in growth in industrial production"  

And a recap from Stone McCarthy:

January new durable goods orders were reported down 4.0%, following a slight upward revision in December to up 3.2% (previously +3.0%). The January performance was below most expectations, and reflected widespread softness across components, not just the expected drop in transportation due to a decline in civilian aircraft orders. Although the fall in new orders was steep, it was also after two months of solid gains. Since these numbers tend to see-saw from month-to-month, a one-month decline is should not be worrisome. Strong orders for civilian aircraft in February are likely to boost the next month's report.


Expectations in a Bloomberg survey centered for a 1.0% decline. Estimates fell across a range of down 4.3% to up 1.5%. Our forecast was for a decline of 1.8%.


Transportation orders were anticipated to fall in January due to fewer civilian aircraft orders. Boeing reported 150 new orders for the month, which was a drop of 137 from the prior month Overall orders for transportation equipment were down 6.1%, with declines of 19.0% in nondefense aircraft and 5.6% in defense aircraft. Motor vehicle orders rose 0.9%, reflecting the steady demand for new autos and trucks.


Nonetheless, new orders excluding transportation were still down 3.2%. There were notable declines in primary metals (-6.7%), machinery (-10.4%), computers (-10.1%), and electrical equipment (-1.9%). With the exception of computers, these were all higher in the prior two months, so this is consistent with the direction of total new orders. There was a modest gain of 0.7% for fabricated metals and communications equipment of 1.4%.

Visually, this is the biggest decline since January 2009.

Source: Census Bureau