No full steam to bull course on my radar yet.. although I was positive on Friday and posted that we will close above the pivotal 1292 despite of a close well below it on Thursday, I think 1330 ramins the top for me from 1362 now a little lower.. On NAPM importance you must have read my response to Lee. It clearly reinforces the view that the strength in domestic manufacturing is showing through now that export
orders have stopped declining. Fed is watching this very carefully.. According to FirstUnion David Orr 'Fed is probably focusing on reports on the industrial sector, which is where the economy's cyclical impulse is generated.'
Durable Goods Orders (April)
Decline Less Than Meets The Eye. Underlying Trend At 5%-6% Nominal
Growth.
May 26, 1999
The headline
Durable Goods
Orders figure for
April showed a 2.3%
decline from March,
well below
expectations of an
0.3% monthly
increase. However,
the shortfall was due
entirely to the volatile
transportation sector,
which saw a 12.4%
plunge mo/mo.
Excluding
transportation,
orders rose 0.9%,
following a 2.0%
monthly increase in
March. As the top
chart indicates, the
underlying trend is
improving,
reinforcing the view
that the strength in
domestic
manufacturing is
showing through
now that export
orders have stopped
declining.
By sector, the results
were mixed. The drop
in Transportation was
led by a 15% drop-off
in aircraft orders, but
non-aircraft
transportation orders
also sagged badly,
down 12% - which
doesn't fit with the
strong sales and
production of motor
vehicles. Orders for
primary metals and
industrial machinery
rose 1.3% and 3.5%,
respectively, while
electrical/electronic
orders slipped by
0.7%. In this
advance report,
sub-categories are
not broken out,
making it
impossible to see
how much of the
strength is in
high-tech
equipment. That is
important because
rapid growth in
high-tech has a
deflationary impact,
whereas high growth
in traditional
equipment would
concern the Fed much
more.
Non-Defense
Capital Goods
Orders showed the
same pattern, with
total orders falling
1.5% mo/mo, but
after excluding
aircraft, orders
inched up 0.3%.
While that doesn't
sound like much, it
followed a strong
3.9% monthly
increase in March,
and put the April
level 3.0% above
the 1Q (not
annualized). The
middle chart shows
the trend of that
series stabilizing.
For GDP purposes,
shipments of
Non-Defense
Capital Goods were
solid in April, up
0.8%. In this case,
however, shipments of
aircraft rose 1.8%, so
the increase ex-aircraft
was 0.6%. Still, the
April level of that
ex-air series was
4.8% above the 1Q
average (not
annualized). The
bottom chart shows
that series beginning to
turn up.
While monthly
volatility makes the
Durable Goods data
hard to interpret, a
look at the yr/yr
increase for the first
4 months shows a
much clearer
picture. Total orders
are up 5.5% and
ex-transportation, up
4.8%. For
Non-Defense Capital
Goods Orders, the
total increase is 5.6%,
and ex-aircraft is
6.2%. Gains of
5%-6% (in nominal
dollars) are solid,
but, in our view,
they are not
"over-heated" and
don't portend
inflation problems.
Durable Goods Orders (April)
Decline Less Than Meets The Eye. Underlying Trend At 5%-6% Nominal
Growth.
May 26, 1999
The headline
Durable Goods
Orders figure for
April showed a 2.3%
decline from March,
well below
expectations of an
0.3% monthly
increase. However,
the shortfall was due
entirely to the volatile
transportation sector,
which saw a 12.4%
plunge mo/mo.
Excluding
transportation,
orders rose 0.9%,
following a 2.0%
monthly increase in
March. As the top
chart indicates, the
underlying trend is
improving,
reinforcing the view
that the strength in
domestic
manufacturing is
showing through
now that export
orders have stopped
declining.
By sector, the results
were mixed. The drop
in Transportation was
led by a 15% drop-off
in aircraft orders, but
non-aircraft
transportation orders
also sagged badly,
down 12% - which
doesn't fit with the
strong sales and
production of motor
vehicles. Orders for
primary metals and
industrial machinery
rose 1.3% and 3.5%,
respectively, while
electrical/electronic
orders slipped by
0.7%. In this
advance report,
sub-categories are
not broken out,
making it
impossible to see
how much of the
strength is in
high-tech
equipment. That is
important because
rapid growth in
high-tech has a
deflationary impact,
whereas high growth
in traditional
equipment would
concern the Fed much
more.
Non-Defense
Capital Goods
Orders showed the
same pattern, with
total orders falling
1.5% mo/mo, but
after excluding
aircraft, orders
inched up 0.3%.
While that doesn't
sound like much, it
followed a strong
3.9% monthly
increase in March,
and put the April
level 3.0% above
the 1Q (not
annualized). The
middle chart shows
the trend of that
series stabilizing.
For GDP purposes,
shipments of
Non-Defense
Capital Goods were
solid in April, up
0.8%. In this case,
however, shipments of
aircraft rose 1.8%, so
the increase ex-aircraft
was 0.6%. Still, the
April level of that
ex-air series was
4.8% above the 1Q
average (not
annualized). The
bottom chart shows
that series beginning to
turn up.
While monthly
volatility makes the
Durable Goods data
hard to interpret, a
look at the yr/yr
increase for the first
4 months shows a
much clearer
picture. Total orders
are up 5.5% and
ex-transportation, up
4.8%. For
Non-Defense Capital
Goods Orders, the
total increase is 5.6%,
and ex-aircraft is
6.2%. Gains of
5%-6% (in nominal
dollars) are solid,
but, in our view,
they are not
"over-heated" and
don't portend
inflation problems.
|
