Analyst Says Reports Don’t Indicate Cooling Economy

Two reports released by the Dept. of Commerce on Wednesday indicate that the economy is slowing down after a strong first quarter. Durable goods orders dropped $5.7 billion (2.9%) to $191.3 billion in April from the month before, while in the same period sales of new homes dropped 11.8% to an adjusted annual rate of 1,093,000. On the durable goods side (products expected to last longer than three

Two reports released by the Dept. of Commerce on Wednesday indicate that the economy is slowing down after a strong first quarter. Durable goods orders dropped $5.7 billion (2.9%) to $191.3 billion in April from the month before, while in the same period sales of new homes dropped 11.8% to an adjusted annual rate of 1,093,000.

On the durable goods side (products expected to last longer than three years), the 2.9% decrease in new orders follows a 5.7% March increase. Transportation equipment, down following two consecutive months of increases, had the largest decrease, down 4.7% to $54.5 billion. Communications equipment is continuing expand, however, up 16.6%.

Industry analyst Chris Brady, of Commercial Motor Vehicle Consulting pointed out that March’s 5.7% is a steep growth and therefore, the 2.9% decline in April is not a negative indicator.

“It’s (the March figure) an unusually large increase in that one month so the decline this month isn’t concerning—its trending upward and a volatile number,” Brady told Fleet Owner.

Shipments of durable goods fell 0.8% to $195.3 billion, following a 4.3% increase in March. Out of durable goods shipments, transportation equipment again netted the largest decrease of 3.9% to $54 billion. Computers and related products are showing strength, up 6.3% or $8.8 billion.

Although shipments of durable goods have the most immediate impact on the trucking industry, the 0.8% decline should be of little consequence to truckers, according to Brady.

“That (figure) is in dollars but not in tonnage,” Brady said. “What we’ve seen [in tonnage] is that trucking companies are very positive based on the orders OEMs are receiving.”

In a separate report, 1,093 new homes were sold in the U.S. on April, down from 1,239 in March. In the South, a region that traditionally nets the most sales, sales plunged 22% to 460 units. Sales jumped 10.8% in the Midwest to 216 units. Sales in the Northeast and the West fell 2.5% and 9.4%, respectively.

Both figures are preliminary and are subject to significant revision, leaving analysts hesitant to draw solid conclusions based on the data. New home sales, for example, are subject to a 6.9% margin or error.

“One month isn’t any indication— in the government report (for new residential sales) it’s usually five or six months for a trend because weather plays such a role,” Brady said, pointing out the first quarter posted an overall increase, spurred by consumers rushing to the market before interest rates go up.

“The psychology of upward trends pending on interest rates is usually a stimulant to the market,” Brady said.

In a separate report released today by the Bureau of Economic Analysis, gross domestic product (GDP) grew 4.4% in the first quarter ended March. Contributing to the increase are consumer spending, business investments in equipment and software, increased federal government spending, and decreasing imports (imports are a subtraction to GDP calculation).

GDP is the output of labor and goods produced in the U.S. and a yardstick for the economy.

Overall, given the strong first quarter trends and strong truck sales, Brady does not perceive April preliminary figures as a sign of the economy slowing.

“These numbers are coming off high numbers from the previous month. If they came off low numbers, that’d be a concern,” Brady said. “The only wild card out there is fuel, high energy prices and how that affects consumer spending and businesses.”

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish