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April 25, 2019 | Durable Goods Orders Soar 2.7% With Aircraft and Cars Leading: Bond Market Yawns

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Once again we have another seemingly hot economic report with the bond market giving a big yawn.

The Advance Durable Goods report on shipments, new orders, and inventories lifted what had been a stagnating view of US manufacturing.

New Orders

New orders for manufactured durable goods in March increased $6.8 billion or 2.7 percent to $258.5 billion, the U.S. Census Bureau announced today. This increase, up four of the last five months, followed a 1.1 percent February decrease. Excluding transportation, new orders increased 0.4 percent. Excluding defense, new orders increased 2.3 percent. Transportation equipment, also up four of the last five months, led the increase, $6.1 billion or 7.0 percent to $93.8 billion.

Shipments

Shipments of manufactured durable goods in March, up four of the last five months, increased $0.9 billion or 0.3 percent to $259.6 billion. This followed a 0.3 percent February increase. Transportation equipment, up following two consecutive monthly decreases, drove the increase, $1.0 billion or 1.1 percent to $90.7 billion.

Capital Goods

Nondefense new orders for capital goods in March increased $4.9 billion or 6.5 percent to $80.5 billion. Shipments increased less than $0.1 billion or virtually unchanged to $79.0 billion. Unfilled orders increased $1.4 billion or 0.2 percent to $708.2 billion. Inventories increased $1.3 billion or 0.7 percent to $184.9 billion. Defense new orders for capital goods in March increased $1.0 billion or 7.4 percent to $13.9 billion. Shipments increased $0.1 billion or 1.0 percent to $12.6 billion. Unfilled orders increased $1.4 billion or 0.9 percent to $158.1 billion. Inventories increased $0.2 billion or 0.8 percent to $23.1 billion

New Order Drivers

  • Transportation up 7.0%
  • Motor vehicles and parts up 2.1%
  • Nondefense aircraft up 31.2%
  • Defense aircraft up 17.7%

Excluding Transportation

  • Shipments fell 0.1%
  • New orders rose a more modest 0.4%.
  • Unfilled orders were flat.
  • Inventories rose 0.4%

Bond Yields

When I saw the headline numbers I wondered how much bond yields would jump.

The answer at the moment is about +1 basis point on 5-year, 10-year, and 30-year bonds.

The yield on the 3-month note fell about 2 basis points.

Simply put, there was no discernible reaction.

Synopsis

Seemingly blowout transportation numbers don’t look as good if you dive into the details.

Excluding transportation, the numbers look good, except inventories.

That said, this was a strong report or at least a way better than expected report.

What manufacturers think they are going to do with motor vehicles and parts is a mystery. Inventories are high and rising.

The reaction to the news is as important as the news. The bond market let out a huge yawn.

Mike “Mish” Shedlock

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April 25th, 2019

Posted In: Mish Talk

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