Durable Goods Orders And Consumer Spending Plunge

In yet another sign the recession is steepening U.S. Durable Orders Collapse.

New Orders

New orders for manufactured durable goods in October decreased $12.7 billion or 6.2 percent to $193.0 billion, the U.S. Census Bureau announced today. This was the largest percent decrease in new orders since October 2006 and followed two consecutive monthly decreases including a 0.2 percent September decrease.

Excluding transportation, new orders decreased 4.4 percent. Excluding defense, new orders decreased 4.6 percent. Transportation equipment, down two of the last three
months, had the largest decrease, $6.1 billion or 11.1 percent to $49.0 billion.

Shipments

Shipments of manufactured durable goods in October, down three consecutive months, decreased $5.0 billion or 2.4 percent to $202.9 billion. This followed a 0.2
percent September decrease. Transportation equipment, down two of the last three
months, had the largest decrease, $2.4 billion or 4.6 percent to $48.3 billion.

Unfilled Orders

Unfilled orders for manufactured durable goods in October, down for the first time in twenty-six months, decreased $4.6 billion or 0.6 percent to $823.6 billion.
This followed a 0.2 percent September increase. Primary metals, down three consecutive months, had the largest decrease, $2.8 billion or 10.9 percent to $23.3
billion. This was the largest percent decrease since the series was first stated on a NAICS basis in 1992.

Inventories

Inventories of manufactured durable goods in October, up fifteen of the last sixteen months, increased $1.4 billion or 0.4 percent to $341.1 billion. This was at the
highest level since the series was first stated on a NAICS basis in 1992 and followed a 0.2 percent September increase. Transportation equipment, up twenty-one of the last twenty-two months, had the largest increase, $1.3 billion or 1.5 percent to $89.9 billion.

Inventories Up Orders Down

With inventories rising and orders falling layoffs will have to increase.

Consumer Spending Falls 1%

Bloomberg is reporting Consumer Spending in U.S. Falls 1%, Most in 7 Years.

Spending by U.S. consumers dropped in October by the most since the 2001 contraction, signaling the economy is sinking into a deeper recession.

The 1 percent decline in purchases followed a 0.3 percent drop in September, the Commerce Department said today in Washington. A separate report from Commerce showed business investment also tumbled last month.

The biggest consumer spending slump in three decades is likely to persist as home prices fall and job losses mount, threatening the holiday sales outlook at retailers from Zale Corp. to Best Buy Co. Faltering demand has caused the Federal Reserve, Treasury and President-elect Barack Obama to ratchet up plans to ease the credit crisis.

"Everybody is cutting back at the same time," Christopher Low, chief economist at FTN Financial in New York, said before the report. "This takes us out of the generic recession category and puts us in the severe recession category."

Economists forecast spending would fall 1 percent, after according to the median of 72 estimates in a Bloomberg News survey. Projections ranged from declines of 0.4 percent to 2 percent.

Orders for durable goods fell 6.2 percent last month, twice as much as forecast and the biggest drop in two years, Commerce reported separately.

Adjusted for inflation, spending fell 0.5 percent, a fifth consecutive decline. The last time price-adjusted spending dropped as many months in a row was in 1990-91.

Consumer spending dropped at a 3.7 percent annual pace in the third quarter, more than the government had previously forecast and the biggest plunge since 1980, revised Commerce figures showed yesterday. The economy shrank 0.5 percent, also faster than initially estimated.

Treasuries Rally

With the grim economic news continuing one might expect treasuries to rally and that is what has happened.



click on chart for sharper image
Chart courtesy of Bloomberg.

Yields collapsed across the curve today with the yield on the long bond once again nearing 3.50. The 10 year is on the verge of printing another 2 handle and the 5 year a 1 handle. As long as the economy stays weak, treasury bears are going to be very frustrated shorting the so called "bond bubble".

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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