- by New Deal democrat
Yesterday our month started out with reports that manufacturing in August was less positive than in the several months prior, while construction (ex-AI data centers) was absolutely recessionary. This morning was followed up by the final July report on manufacturers’ durable goods orders, a short leading indicator.
While total durable goods orders (blue) rose, core capital goods orders (red), which are much less volatile, backed off slightly from record levels:
The YoY comparison shows, particular with regard to core capital goods orders, that expansion in the sector is still accelerating, with core orders up 12.6%, the biggest increase in four years, and only slightly behind June’s level:
Meanwhile the Freight Transportation Services Index for June (so lagging by several months) showed a -0.3% decline to the lowest level since December 2022:
It is interesting to compare this with sales of heavy weight trucks, which I find very useful because they generally decline sharply, and with much less noise, well ahead of recessions, as well as increasing a number of months into expansions:
For oncoming recessions, sales of heavy weight trucks have given the better and more leading signal. Interestingly, though, on a YoY basis, the freight index has tended to turn negative a number of months before sales of heavy weight trucks do:
For the last two months, truck sales have turned slightly positive YoY, in accord with their general recovery this year. But the freight services index is down -1.7%. That’s not recessionary (for that I would expect to see readings worse than -2.0% YoY on a three month average basis), but it does raise the question of whether sales of heavy weight trucks might turn back down in the next several months.
In general, this is confirmation that manufacturing has been doing well this year, while transportation, which includes construction materials as well as manufacturing inputs and outputs, has been much more mixed.
