April 2, 2015

Factory Orders Beat Ugly Expectations; January Revised Lower; Jan-Feb Orders and Shipments Far Lower Than Jan-Feb 2014 (Hinting at a Huge Negative 1Q15 GDP?)

Filed under: Economy,Taxes & Government — Tom @ 10:54 am

Is today’s manufacturing report really saying what I think it’s saying?

The markets may be relieved that the expected 0.5 percent predicted decline in new factory orders didn’t materialize, but the rest of the news contained in today’s report does not bode well at all for 1Q15 GDP:

New orders for manufactured goods in February, up following six consecutive monthly decreases, increased $0.8 billion or 0.2 percent to $468.3 billion, the U.S. Census Bureau reported today. This followed a 0.7 percent January decrease. Excluding transportation, new orders increased 0.8 percent.

Shipments, up following four consecutive monthly decreases, increased $3.6 billion or 0.7 percent to $481.3 billion. This followed a 2.3 percent January decrease.

January’s decline in orders came in worse (-0.7 percent) than originally reported in the March 5 full January release (-0.2 percent).

January’s decline in shipments came in worse (-2.3 percent) than originally reported (-2.0 percent).

It’s pretty tough to get to a positive quarterly GDP with so many negative numbers through the first two months.

As seen in the report, year-to-date raw (i.e., not seasonally adjusted) shipments are down 3.7 percent through February. Raw orders are down 5.4 percent. The Jan.-Feb. 2015 seasonally adjusted dives vs. Jan.-Feb. 2014 are smaller, for no apparent reason (calculated separately, they are -2.4 percent on orders and -3.5 percent on shipments).

Though they only represent part of the picture ($5.5 trillion or so per year is about one-third of GDP), these year-to-date stats would argue for a lower current-dollar GDP figure than a year ago — in other words, reversing all of the gains seen during last year’s second, third and fourth quarters, even before adjusting for inflation.

In other words, by themselves, these stats argue that we are two months into a hugely negative 1Q15 GDP.

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UPDATE: Also, remember, if you’re comparing years, that March 2014 was seen as a bit of a breakout month after bad weather the previous two months. That’s why the bad weather in March 2015 was rolled out as an excuse for the puny 0.6 percent year-over-year increase in vehicle sales reported yesterday.

That doesn’t bode well at all for other March 2015 vs. March 2014 comparables coming down the pike.

UPDATE 2, 3:55 p.m.: Moody’s has digested the news of the past 24 hours and moved its 1Q15 estimate UP to an annualized 1.0 percent.

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1 Comment

  1. [...] but January went from -0.5 percent to -0.7 percent. January-February factory orders and shipments are significantly below Jan.-Feb. [...]

    Pingback by BizzyBlog — April 3, 2015 @ 8:47 am

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