FLASH UPDATE - March 25, 2009

 

 

 

JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS

 

FLASH UPDATE

March 25, 2009

 

__________

 

Durable Goods Orders Tumble in Record Annual Decline

Pattern of Happy Spins Being Given to Volatile Monthly Data

 

__________

 

PLEASE NOTE: Today’s brief Flash Update addresses the durable goods report, which likely will be heavily and misleadingly hyped as a harbinger of economic rebound, given the reported month-to-month gain. The newsletter is on track for publication over the coming weekend.

 – Best wishes to all, John Williams

 

Beware of Market Hype on Volatile Data. As with the recent housing starts report, reported month-to-month changes in highly volatile series can surprise market expectations. Also, as discussed in recent writings, some month-to-month bottom-bouncing can be expected in a number of series, as business conditions hit a plateau of low-level activity, before moving lower again. With the Administration, Fed and Wall Street all pushing for improved economic reporting, a note of caution is appropriate. Generally, the best indicator as to how an economic series is performing is to look at the pattern of its year-to-year change. Such mutes much of the impact of revisions and eliminates a number of problems with seasonal-factor adjustments. Such an assessment of this morning’s (March 25th) durable goods report shows little reason for market elation.

Durable Goods Annual Growth at Record Low. The regularly-volatile new orders for durable goods reportedly rose by 3.4% month-to-month in February, as reported by the Census Bureau. Given the high volatility of the series, such a seasonally-adjusted monthly increase is of little significance, particularly where most of the gain was due to downside prior period revisions. Net of revisions, the February orders rose by 1.1%. January’s previously reported monthly contraction of 5.2% revised to a contraction of 7.3%. The same pattern of revisions was seen in the prior release.

More importantly, before any accounting for inflation, February’s new orders were down by 28.9% from February 2008, setting a record annual decline for the current series, which goes back to 1992 (the reading is the worst of the current downturn). January’s annual decline was revised to 27.9% (previously 26.4%). Adjusted for inflation the series would have shown even sharper contractions.

The widely followed new orders for nondefense capital goods rose by 7.4%, again heavily distorted by prior-period revisions. Net of revisions, February orders rose by just 0.4%. In January, orders fell by a revised 8.9% (previously down by 2.7%). Year-to-year, February orders were down by 35.5%, following a revised 35.4% (was 31.4%) in January.

 

__________