Durable Goods Collapse

Durable goods orders dropped 3.8% when transportation goods were backed out. Total new orders for manufactured goods rose .3%, less than expected, to $193 billion, according to the Commerce Department.

Inventories of manufactured durable goods rose .6% to $311.2 billion. The inventory build-up may give companies the opportunity to cut orders if the economy continues to slow. That should depress orders as the year goes on.

Transportation equipment orders ran against the overall trend– up 13.1% to $52.6 billion.

The data shows that the economic slowdown, which looks more and more like a double-dip recession, has moved from employment, housing, consumer confidence, and retail to the manufacturing sectors. All of these drops combine to paint a picture of a US economy that has slowed considerably in the last 60 days.

CBO estimates are that most of the $787 billion Obama stimulus package has been spent, leaving mostly funding for infrastructure. That, in and of itself, it not sufficient to buoy the economy.

Congress and the President appear ready to eliminate the Bush tax cuts at year end. But, without stimulus and with higher taxes, which may be regressive, the drop in GDP growth could become negative before the end of the year.

Douglas A. McIntyre