- by New Deal democrat
Normally I don’t pay much attention to durable goods orders. They are simply too volatile to distill signal from noise on most occasions. But since I’ve been watching for signs that the producer turndown has spread to consumers, it definitely merits a mention this month.
That’s because new consumer durable goods orders declined -2.8% in January. They are now down -9.3% from their July peak:
Even so, note that in the months leading up to the producer-led 2001 recession, consumer durable goods orders were down over -20% for several months. There have been several slowdowns - 1995, 1998, 2006, and 2015 - where 10% declines similar to this decline have not led to recessions.
Below I show manufacturers’ durable goods orders (blue, left scale) vs. consumer durable goods orders (red, right scale):
The 2008 recession was consumer-led and started out with a spike in gas prices from $3 to $4 a gallon, on top of a steep decline in housing, and a significant decline in motor vehicle sales.
While the January decline in consumer durable goods orders takes us a step closer to recession, barring a big downward revision in January retail sales and payrolls, it still is most consistent with a slowdown only. Of course, coronavirus may make all of this irrelevant.
