This Week’s Durable Goods Report Brought To You By The Number 230 Billion And By The Letter V
As of this week, we have what’s called the Monthly Advance report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for the month of July. This is an important indicator and the new number is indicating something important — a rapid recovery in the manufacturing sector.
Don’t take my word for the importance of the metric. Here’s Investopedia:
· Durable goods orders is a broad-based monthly survey conducted by the U.S. Census Bureau that measures current industrial activity and is used as an economic indicator by investors.
· Durable goods orders provide more insight into the supply chain than most indicators and can be especially useful in helping investors understand the earnings in industries, such as machinery, technology manufacturing, and transportation.
· A high durable goods number indicates an economy on the upswing while a low number indicates a downward trajectory.”
Note that it is ‘broad-based’, meaning it tells us something about the economy in general. Also note that it is a glimpse into the supply chain, meaning that it includes portions earlier in the production and consumption process, which are an important part of the economy but are not fully covered in various consumption-driven measures of growth, such as GDP and various retail sales. Also, it is by nature focused on manufacturing of heavy goods, and as we have shown before, that’s a substantial slice of economic output — larger than sectors which tend to get more attention such as retail or entertainment. We have also argued that sectors like this are less vulnerable to the adverse effects of pandemics and more amenable to reopening then some of the smaller-impact slices.
These recent results are consistent with that idea – durable goods manufacturing is coming back strong.
(Source: U.S. Bureau of Economic Analysis)
That’s roughly $231 Billion in goods in one month (July), which is an 11% increase. The prior month’s number was revised upwards so that it represented almost an 8% increase. That’s more than half a trillion dollars in three months.
(Source: U.S. Bureau of Economic Analysis)
Look at the cycle starting with the crisis in February and to the latest available data. It should remind you of a certain letter:
(Source: Federal Reserve Bank of St. Louis)
Not every sector is likely to be able to make a V-shaped recovery. Nightclubs and nail salons might look a bit more like a mix of an L and a checkmark, so V is not the only letter one can use to spell out the shape of our recovery. But durable goods is a big one and it has almost made it back to normal levels of output.
Jerry Bowyer is a Forbes contributor, contributing editor of AffluentInvestor.com, and Senior Fellow in Business Economics at The Center for Cultural Leadership.
Jerry has compiled an impressive record as a leading thinker in finance and economics. He worked as an auditor and a tax consultant with Arthur Anderson, as Vice President of the Beechwood Company which is the family office associated with Federated Investors, and has consulted in various privatization efforts for Allegheny County, Pennsylvania. He founded the influential economic think tank, the Allegheny Institute, and has lectured extensively at universities, businesses and civic groups.
Jerry has been a member of three investment committees, among which is Benchmark Financial, Pittsburgh’s largest financial services firm. Jerry had been a regular commentator on Fox Business News and Fox News. He was formerly a CNBC Contributor, has guest-hosted “The Kudlow Report”, and has written for CNBC.com, National Review Online, and The Wall Street Journal, as well as many other publications. He is the author of The Bush Boom and more recently The Free Market Capitalist’s Survival Guide, published by HarperCollins. Jerry is the President of Bowyer Research.
Jerry consulted extensively with the Bush White House on matters pertaining to the recent economic crisis. He has been quoted in the New York Times, The Wall Street Journal, Forbes Magazine, The International Herald Tribune and various local newspapers. He has been a contributing editor of National Review Online, The New York Sun and Townhall Magazine. Jerry has hosted daily radio and TV programs and was one of the founding members of WQED’s On-Q Friday Roundtable. He has guest-hosted the Bill Bennett radio program as well as radio programs in Chicago, Dallas and Los Angeles.
Jerry is the former host of WorldView, a nationally syndicated Sunday-morning political talk show created on the model of Meet The Press. On WorldView, Jerry interviewed distinguished guests including the Vice President, Treasury Secretary, HUD Secretary, former Secretary of Sate Condoleezza Rice, former Presidential Advisor Carl Rove, former Attorney General Edwin Meese and publisher Steve Forbes.
Jerry has taught social ethics at Ottawa Theological Hall, public policy at Saint Vincent’s College, and guest lectured at Carnegie Mellon’s graduate Heinz School of Public Policy. In 1997 Jerry gave the commencement address at his alma mater, Robert Morris University. He was the youngest speaker in the history of the school, and the school received more requests for transcripts of Jerry’s speech than at any other time in its 120-year history.
Jerry lives in Pennsylvania with his wife, Susan, and the youngest three of their seven children.