Durable Goods, Beige Book
My pal Larry Kudlow is apoplectic over the upside surprise in Durable Goods. They rose 0.8% headline and 2% ex transports versus consensus estimates of a decline of 0.3% and 0.2% ex transports. Leading the gains was an increase in orders for electrical equipment, machinery, vehicles and parts, primary and fabricated metals.
Miller Tabak's Peter Boockvar notes that "the Govt stimulus package has a depreciation tax credit that expires by year end -- so companies have to now use it or lose it. That could have had an impact on order rates but we need more than one month's data to see by how much."
Regardless, as we have said many times, watch the overall trend, not a single report.
Charts by Jake
Let's see what sectors are expanding and contracting, via the Federal Reserve Beige Book:
>
Contracting sectors
Residential real estate
Department Stores
Home Improvement
Office/Shopping Mall Real Estate
Wood Products
Construction Equipment
Banking
Insurance
Trucking Transports
SUV's/Light Trucks
Restaurants
Job Placement Agencies
Airlines
Environmental Services
Chemical manufacturing
Neutral sectors
Discount Stores
Tourism (local>far-away destination)
Rail Transports
Fuel Efficient Cars/Hybrids
Electronics (boost from tax rebates)
Food Retailing
Steel Producers
Expanding sectors
Tech services
Telecommunications
Health Care/Pharma
Oil/Natural Gas Drilling
Wind Turbine Parts
Food Manufacturing
Specialty Aircraft Parts
>
Sources: Federal Reserve, Merrill Lynch, Miller Tabak
Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders June 2008
Manufacturing and Construction Division, Commerce Department, JULY 25, 2008,
http://www.census.gov/indicator/www/m3/adv/pdf/durgd.pdf
Friday, July 25, 2008 | 09:15 AM | Permalink
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Comments
He's "apoplectic"??? I do not think it means what you think it means...
~~~
BR: So excited, he was about to burst a vessel or have a seizure!
Posted by: Halfdan | Jul 25, 2008 9:25:33 AM
I suppose that's the pep rally theme for today on CNBC.
Posted by: Mike in NOLa | Jul 25, 2008 9:31:52 AM
Let's all calm down here. Don't forget about June's Industrial Production report. Remember we had a big 0.5% gain? But that was a bizarre number for one reason. The entire gain was from truck production up 9% for the month.
You think truck sales went up 9%? I got a bridge to sell ya.
The automakers used up all their material making the 9% gain in trucks and the 3% gain in autos, and in the same month they ordered 5% more metal. I don't know why GM & Ford are inventory happy, but it isn't something to get excited about.
Posted by: Michael Donnelly | Jul 25, 2008 9:44:22 AM
Even as a seasoned CNBC mocker I was taken aback by the level of Panglossian myopia on display after that release. If I heard it all correctly:
(i) it marks a definitive turning point in the economic cycle;
(ii) the Fed can now start tightening again;
(iii) it has NOTHING to do with the weak dollar, just "great US products";
(iv) Phil Gramm was right - this is just a "mental recession";
(v) Q2 GDP will print around 3%, so what are we worried about?; and, of course -
(vi) buy stocks!!
Barry, I have been a regular reader for a long time and would like to echo what some others have asked: is the CNBC crew's optimism real, or are they just paid to cheerlead like that?
I ask, as I used to work with an economist who resolutely bought the "Kudlow line". I made the case to him clearly in 2004,5,6 that the housing market was a bubble, the economy was headed for the rocks, external imbalances as a dollar risk etc. He would then fly into a rage and literally rant...he even called the idea that Euro:USD could go to 1.60... "immoral" and "dangerous"(!). So he WAS the real deal...
How about the CNBC guys- cynical shills or true believers?
Posted by: Gloomy Observer | Jul 25, 2008 9:52:50 AM
"apoplectic" - to "stroke out" like kudlow loves to do.....very good use of the wprd BR.
Posted by: josh | Jul 25, 2008 9:54:13 AM
http://biz.yahoo.com/ap/080725/economy.html
AP
Defense spending helps lift durable goods orders
Friday July 25, 9:15 am ET
By Martin Crutsinger, AP Economics Writer
Big-ticket factory orders rose at fastest pace in 4 months, helped by defense spending
WASHINGTON (AP) -- Orders to factories for big-ticket manufactured goods such as cars, appliances and machinery rose at the fastest pace in four months in June. While the increase was much stronger than had been expected, much of the strength was related to heavy defense spending.
ADVERTISEMENT
The Commerce Department reported Friday that orders for durable goods increased 0.8 percent last month, far better than the 0.4 percent decline that economists had been expecting. However, excluding demand for defense equipment, total orders would have been up a much more modest 0.1 percent.
Analysts said that the June performance was being propped up by sizable military spending for equipment, reflecting the ongoing wars in Iraq and Afghanistan, and this was offsetting widespread weakness in the rest of the economy.
"With orders excluding defense falling at a 4 percent annualized rate in the second quarter, it is pretty clear manufacturing is hardly thriving," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
___________
It just goes to show "It's always something".
Posted by: yourkillingmelarry | Jul 25, 2008 9:57:05 AM
Halfdan,
Kudlow wouldn't have to be in a rage to validate Barry's usage of the word. He would just have to be so excited that he might be inviting a seizure. Red in the face, whether from anger or exuberance, would suffice.
dgov
Posted by: dgoverde | Jul 25, 2008 10:02:17 AM
Oh happy day!
Home sales and consumer sentiment also both beat estimates. No recession. Everybody can to the mall now.
Posted by: Mike in NOLa | Jul 25, 2008 10:03:37 AM
I haven't looked up apoplectic yet, but if it means "liar", then I am in total agreement. I know BR is sweet on Larry Kudlow because Kudlow is nice to him in private, but that man's on-air misinformation needs to be stopped. He is worse than Bill O'Reilly and at least O'Reilly has entertainment value. I don't know how CNBC gets away with its daily stock pimping without the SEC and / or FCC providing some sort of oversight. It is one thing for experts on two sides of an economic argument to debate, but when the anchorpeople, moderators, and reporters are even more enthusiastic than their guests at promoting a bullish picture of the economy, the stock market, and specific investments, then that is unhealthy or even dangerous to the American public, especially for those less informed than people who participate on this blog. In my mind, CNBC has become worse than Fox News. Depending on your political viewpoint, you can enjoy or hate Fox News, but you won't lose your life savings based on anything you watch on it.
Posted by: CNBC Sucks | Jul 25, 2008 10:05:44 AM
Since war is our only growth "industry" maybe we should start dropping empty houses on our enemies???? Hey, it worked in the Wizard of Oz, and I don't think Kansas had that much unsold inventory in those days either...
Posted by: lurker | Jul 25, 2008 10:06:57 AM
"WASHINGTON (AP) -- While the increase was much stronger than had been expected, much of the strength was related to heavy defense spending."
Surely this must be some kind of contrary indicator - AP reporting the facts behind the headline number.
Posted by: Winston Munn | Jul 25, 2008 10:07:19 AM
Number heavy on defense spending...Crecenzi also points out tremendous rise in metal prices.
All this proves is :
1) we are wasting too much money in Iraq
2) economists can't predict crap
3) commodity prices are out of control
4) stock investors are largely a pathetic, greedy, impulsive lot
Posted by: Steve Dodell | Jul 25, 2008 10:07:45 AM
it's been over 1 1/2 hours and they still haven't put the actual pdf/xls file for Durable Goods up on the census.gov website. Is this a blatant manipulation?
Posted by: Juhuti | Jul 25, 2008 10:11:56 AM
dgoverde,
Technically true.
Posted by: Halfdan | Jul 25, 2008 10:12:56 AM
Isn't it true that CNBC's viewership/ratings basically tank in a bear market? Didn't the channel fall off a cliff in after the dot.com bust? Well, there's your reason for the cheerleading.
It's also a fact that that Americans generally won't tune in if the tone is too downbeat - - we're a country of little children who can't stand bad news - hence 8 years of the moron also known as GWB and the continual denial about the economy, markets, and overall state of the nation now. We would rather stay mired in the "sunny optimism of Reagan" than face reality until the ship is basically at the bottom of the ocean.
Posted by: Jeff | Jul 25, 2008 10:17:05 AM
Where are the orders coming from? That is the question.
Posted by: CharmCity | Jul 25, 2008 10:18:17 AM
CNBC sucks, well stated. They need their asses sued off by being a willing participant in corralling the public into the bank's pump and dump schemes. Periodically they have someone who is counter to their spin, purely obligatory to provide proof of attempted objectivity, yet, it is clear they are a media shill for those firms who do not have the public's best interest at heart.
Posted by: Stuart | Jul 25, 2008 10:22:19 AM
Steve Dodell points out more money is being spent on less total transactions, and even fewer in the private sector. Seems pretty obvious we are still in a weakening trend.
Posted by: Paul in NYC | Jul 25, 2008 10:30:39 AM
I had told a friend back at the top of the tech bubble that the indicator of a true bottom was going to be CNBC going off the air, but I guess that's too much to hope for. Those who support the establishment are protected.
Someone had an interesting post somewhere about one of the big effects of Cox's witch hunt was sources of negative blog info drying up because those sources were generally short and were afraid of the SEC, even if they were giving truthful info; it just wasn't worth the hassle.
Posted by: Mike in NOLa | Jul 25, 2008 10:32:53 AM
How about that Michelle Cabrera? What a shill. She should be wearing a sweater with a big "E" on the front and waving a pair of pom-poms.
Posted by: MitchN | Jul 25, 2008 10:35:15 AM
Where are the orders coming from? That is the question. Posted by: CharmCity
Can you sell your own stock to yourself? And for how long?
Posted by: Greg0658 | Jul 25, 2008 10:37:57 AM
>> Since war is our only growth "industry" maybe we should start dropping empty houses on our enemies????
Lurker, LOL! Indeed, if the houses survive the fall, Iraqis can move in. We might even win some hearts and minds that way. ("Look! Granite counter tops!")
Posted by: wunsacon | Jul 25, 2008 11:00:50 AM
Primary metals...prices for primary metals increased in June from May, so the extra $1 billion was simply price increases, not necessarily an increase in orders.
Posted by: John doe | Jul 25, 2008 11:35:50 AM
Is this the T. Boone Pickens wind turbine effect? ;^)
Posted by: donna | Jul 25, 2008 11:47:41 AM
"With orders excluding defense falling at a 4 percent annualized rate in the second quarter, it is pretty clear manufacturing is hardly thriving," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Hmmm! We tend to forget we're involved in 2 wars. Tsk tsk tsk!
"Surely this must be some kind of contrary indicator - AP reporting the facts behind the headline number."
ROFLMAO!!
Posted by: Francois | Jul 25, 2008 12:05:06 PM
