Durable Goods Orders Highlights Other Issues
Durable Goods orders for April, and recent trends in order flow, indicate possible ongoing problems in retail. General economic issues are certainly to blame, but the disappearance of new home demand and reduced financing options look like the greatest catalysts.
Durable Goods Orders
Durable goods orders for the month of April decreased 0.5% from March. This compared to expectations for a greater decrease of 1.1%, according to Bloomberg data. The negative direction, however, still kept the streak of erosion alive in '08. Each month of this year has offered decline in durable goods orders, after a large rise to close out 2007.
It's logical though isn't it? The economy is in contraction (tomorrow's GDP revision will tell), and in contraction orders should decline, especially for big ticket items. Let's take a closer look at the data. New orders decreased $1.0 billion or 0.5%, and excluding transportation, fell 2.5%. Also, ex-defense, orders fell a smaller 0.3%.
Unfilled Orders Reads Ugly
Perhaps the most eye-opening portion of the report offered news that unfilled orders jumped $7.6 billion or 1.0%, to the highest level since 1992. Also disconcerting, April marked the 26th increase in unfilled orders over the last twenty-seven months. When retailers later don't need what they previously asked for, this is perhaps yet another sign of trouble for the group.
We presume there's a penalty paid by retailers when they refuse delivery of ordered goods, so for this to occur, you must have an economic benefit, while still losing money. This also likely relates to the decline of the housing industry, as new home appliance demand has all but disappeared.
We would look to this information and the fact that G.E. (NYSE: GE), the well-managed giant of American industry, is seeking to unload its appliance division, as a guide. We expect department stores like Macy's (NYSE: M), J.C. Penney (NYSE: JCP) and Sears (Nasdaq: SHLD), and other retailers of high-cost home related items, should face ongoing tough times. Same goes for appliance makers, automakers and all typically financed high cost items.
Financing Gone, Harder Sell
As financing options disappear or become less favorable or less available to many, the ability for Americans to purchase high cost items also dissipates. Remember the "new economy," well it appears it was built on a faulty foundation of unwarranted loans. Now as banks overcompensate due to capital requirements and natural human counter-reaction, a strain should weigh on the pace of economic recovery.
Keep reading "The Greek" today and every day for insights into economic data and corporate trends. See our "Topic of Debate" at the site, because we want to hear from you on regular important topics. Also don't miss our weekly market moving event planner, "The Greek's Week Ahead - Critical Oil Price Threshold Reached"Article interests AMEX: DIA, AMEX: SPY, AMEX: DOG, AMEX: SDS, AMEX: QLD, Nasdaq: QQQQ. Pease see our disclosure at the Wall Street Greek website.
Durable Goods Orders
Durable goods orders for the month of April decreased 0.5% from March. This compared to expectations for a greater decrease of 1.1%, according to Bloomberg data. The negative direction, however, still kept the streak of erosion alive in '08. Each month of this year has offered decline in durable goods orders, after a large rise to close out 2007.
It's logical though isn't it? The economy is in contraction (tomorrow's GDP revision will tell), and in contraction orders should decline, especially for big ticket items. Let's take a closer look at the data. New orders decreased $1.0 billion or 0.5%, and excluding transportation, fell 2.5%. Also, ex-defense, orders fell a smaller 0.3%.
Unfilled Orders Reads Ugly
Perhaps the most eye-opening portion of the report offered news that unfilled orders jumped $7.6 billion or 1.0%, to the highest level since 1992. Also disconcerting, April marked the 26th increase in unfilled orders over the last twenty-seven months. When retailers later don't need what they previously asked for, this is perhaps yet another sign of trouble for the group.
We presume there's a penalty paid by retailers when they refuse delivery of ordered goods, so for this to occur, you must have an economic benefit, while still losing money. This also likely relates to the decline of the housing industry, as new home appliance demand has all but disappeared.
We would look to this information and the fact that G.E. (NYSE: GE), the well-managed giant of American industry, is seeking to unload its appliance division, as a guide. We expect department stores like Macy's (NYSE: M), J.C. Penney (NYSE: JCP) and Sears (Nasdaq: SHLD), and other retailers of high-cost home related items, should face ongoing tough times. Same goes for appliance makers, automakers and all typically financed high cost items.
Financing Gone, Harder Sell
As financing options disappear or become less favorable or less available to many, the ability for Americans to purchase high cost items also dissipates. Remember the "new economy," well it appears it was built on a faulty foundation of unwarranted loans. Now as banks overcompensate due to capital requirements and natural human counter-reaction, a strain should weigh on the pace of economic recovery.
Keep reading "The Greek" today and every day for insights into economic data and corporate trends. See our "Topic of Debate" at the site, because we want to hear from you on regular important topics. Also don't miss our weekly market moving event planner, "The Greek's Week Ahead - Critical Oil Price Threshold Reached"Article interests AMEX: DIA, AMEX: SPY, AMEX: DOG, AMEX: SDS, AMEX: QLD, Nasdaq: QQQQ. Pease see our disclosure at the Wall Street Greek website.
posted by The Greek | 10:00 AM
1 Comments:
Greek -what's going on at the FED? This can't be a good sign???
Separately, Federal Reserve Governor Frederic Mishkin has resigned, effective Aug. 31, 2008. In 2006, Mishkin was appointed by President Bush to fill an unexpired term ending Jan. 31, 2014. The statement on the Fed's Web site gave no reason for the resignation, although it did state Mishkin will return to Columbia University as a professor of economics.
Post a Comment
<< Home