Holy Smoke, The Durable Goods Game Continues

Durable Goods for the month of February has come in with a massive surprise this morning.  These might get washed over because of revisions, but these are much better on the surface than what was expected.  The reading came in at +3.4% on the headline durable goods, and it was up at +3.9% on an ex-Transportation.  On the headline numbers we had estimates from both Dow Jones and Bloomberg as being an expected -2.0%.

January was revised, and the revisions are significantly lower.  The headline durable goods was revised to -7.3% from a prior report of -5.2%; and the ex-Transportation revision was more than doubled to -5.9% from a prior reading of -2.5%.

When you adjust for seasonality, this put the total tally at $165.56 billion in long-lasting goods in February.  To show the difference on a raw basis year over year, this was actually a drop of 28.4% on an unadjusted basis.  The portion of unfilled orders also posted another decline, with this one being a drop of -1.3%.  That means that there is a gap ahead rather than pressure building to the upside.

As a reminder, Durable Goods is one of the most volatile numbers and the revisions can be sharp.  These numbers can also whip up and down in a manner that is not necessarily in any correlation with the economy because of timing.  It is great we are seeing the positive numbers, but if you smooth this out then you actually get a wash out when you blend the revised lower numbers of January with the higher numbers in February.

This is a great number on the surface.  Unfortunately, durable goods might not give the right read on any given month.  The revisions for January should only drive that notion home even further.

JON C. OGG
March 25, 2009