The year over year rate of change is still positive. However, the pace of the increase is slowing, indicating that the rate of improvement is decreasing.
The month to month rate of increase shows the decrease in the pace of improvement.
Durable goods:
First, let's take a look at the headline chart -- that is, the chart that shows the total number.
The month to month rate of change among the cities shows most demonstrated a decrease last month.The big issue in the existing home market is a massive inventory overhang. Excess inventory = decreasing prices. I wouldn't expect this situation to change in the near future.
For durable goods, let's start with the headline number and chart:
This is a positive chart, as it shows a continued improvement in durable goods orders. However, the devil is in the details. The the biggest "problem" with these numbers is the skewing effect of aircraft orders. So let's look inside the report
Click for a larger image.
New orders without transportation orders (which are 27.5% of all durable goods orders) dropped .8% last month, and has dropped two of the last three months. However, let's look at some of the other parts of the report.
Machinery orders increased 2% last month and have increased 2 of the last three months.
Computers orders increased, but communications equipment decreased sharply. However, communications equipment has increased strongly the preceding two months, so a drop off is not out of line.
In short, the insides of this report is "fair," because it indicates there is still some retooling going on. However, ideally we'd like to see more strength.
Initial Claims:
Claims data offer rare good news on the labor market as initial claims fell steeply to 434,000 in an October 23 week that isn't skewed by special factors. The level is the lowest since July as is the four-week average of 453,250. Given that July's data were distorted by adjustment problems tied to auto retooling, the latest batch of data is perhaps the best so far of the recovery.
This drop in initial claims is welcome news, as it gets us below the 450,000. However, we need this trend to continue for several weeks, and we need this number to more to the 400,000 area and stay there.
The sum total of all this information is clear: the economy is still slow; housing is facing a massive inventory overhang that will prevent price appreciation for some time. The retooling that we saw earlier in the recovery is slowing. However, the employment situation is marginally better. There is nothing to indicate the economy is going to move quickly into a stronger recovery, but there is nothing to indicate an impending crash either.
