Durable Goods fine but Japan likely distorting data

Durable Goods orders in May rose 1.9% headline and .6% ex transports. The headline figure was .4% better than expected while the latter was .3% below. Most importantly, non defense capital goods orders ex aircraft orders were up 1.6%, better than the 1% estimate and after a drop of .8% in April. For all 3 of the categories, the April figures were revised higher. Its important to note that these are orders and the Japanese supply issues will likely impact the timing of the actual shipments of some big ticket items. Also, it’s possible that orders were accelerated due to concern with supply issues out of Japan so as to better stock inventories with the uncertainty of delivery timing. Shipments in May rose .3% but after falling 1.4% in April. Shipments of transportation goods fell .4% in May after a 3.8% decline in April. Because inventories rose 1.2% and shipments were up just .3%, the inventory to shipments ratio rose to 1.83, the highest since June ’09. Bottom line, durable goods orders rebounded from the April weakness but as mentioned above, the Japanese delivery issues have and will distort the data for a few more months.

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