The Nondefense Market for Durable Goods - The Big Picture

By: Paul_L_Kasriel

Chart 1 shows that in May, shipments of durable goods excluding defense were down year-over-year 4.4%; new orders for the same were down 4.3%. Both started to soften in late 2006 when the tentacles of the housing recession began squeezing other sectors of the economy. The housing recession is taking its toll on the demand for discretionary consumer goods, which is reflected in the contraction in durable goods activity.

This year, there has been a bit of a rebound in shipments and new orders for nondefense capital goods excluding aircraft (see Chart 2). Relatively strong export demand probably is playing a role here. This export demand is likely to allow the U.S. manufacturing sector to escape the degree of contraction it often suffers in recession. If, however, the manufacturing surveys reported by the New York Fed's Buffalo branch, the Philly Fed and the Richmond Fed are any guide, June durable goods orders and shipments data could be quite weak.

Chart 1

Chart 2

By Paul L. Kasriel
The Northern Trust Company
Economic Research Department - Daily Global Commentary

Copyright © 2007 Paul Kasriel
Paul joined the economic research unit of The Northern Trust Company in 1986 as Vice President and Economist, being named Senior Vice President and Director of Economic Research in 2000. His economic and interest rate forecasts are used both internally and by clients. The accuracy of the Economic Research Department's forecasts has consistently been highly-ranked in the Blue Chip survey of about 50 forecasters over the years. To that point, Paul received the prestigious 2006 Lawrence R. Klein Award for having the most accurate economic forecast among the Blue Chip survey participants for the years 2002 through 2005.

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

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