For the first time in a while, the market almost completely ignored the durable goods figures released today; instead favoring a discussion surrounding technology stocks (King/Box/Facebook/Oculus).
The lack of attention focused towards a key component of the GDP figure largely stems from two reasons.
First, the numbers themselves weren’t that interesting, with the broad Durable Goods number coming in at +2.2% on a M/M basis and the less volatile Durable Goods ex transportation at +0.2%. The broad number beat market expectations by 1.2%, while Durable Goods ex transportation was 0.1% below what market participants expected.
Second, indicators that are, in the current environment, more important are due tomorrow and Friday, including initial claims, the third GDP estimate, and Personal Income.
Although investors generally ignored the Durable Goods numbers, it’s probably still useful taking a broad view of how the Durable Goods numbers are looking.
Here’s what the Durable Goods numbers have looked like on a M/M basis since 2012.
Durable Goods numbers
Overall, there’s been a broad dampening in M/M growth, as evidenced by the black trend line through both measures of Durable Goods.
The slowing of M/M growth is most apparent when looking at the Y/Y growth rates.
Below are the Y/Y growth figures for Durable Goods and Durable Goods ex transportation.
The Durable Goods figures are now on the downside half of the second slowing period within the current recovery that began in 2010 (see blue arrow following the second “hill” since 2010).
From 1993 to 2000, Durable Goods experienced three “hills” or peaks before the economy entered the 2001 recession (see hills and troughs of the black lines over these years).
Following the recession trough of 2001, the recovery/boom period from 2002 to 2007 had only one peak before hitting the 2008/2009 recession. The peak occurred in spring of 2006.
After the deep recession of 2008/2009, Durable Goods accelerated quickly, with peaks in 2010 and a recent peak in the summer of 2013.
Reasons to be nervous?
With Durable Goods now decelerating, the question is – are we going to see another 90s, where Durable Goods re-accelerated a third time in 1999 before the recession of 2001 occurred, or are we just now in the 2007 period, where an impending recession is evident?
The market seems to think we’re in the late 1990s, which is more than likely the case. Overall, besides perhaps some equities in frothy territory, there’s no real macroeconomic bubble on the horizon. The macroeconomic picture certainly appears to be simply in the backside portion of a mid-cycle slowdown. Of course, that assumption should make some very nervous.