Drop in durable goods related to September 11

Despite yesterday’s announcement by the Dept. of Commerce that durable goods took a sharp fall in September, industry analysts say it’s not a cause for panic. Jerry Leonard, an analyst with Martin Labbe Associates, said he expected durable goods to take a hit after the September 11 terrorist attacks on New York and Washington. He added that the 8.5% fall in durable goods orders – the lowest level

Despite yesterday’s announcement by the Dept. of Commerce that durable goods took a sharp fall in September, industry analysts say it’s not a cause for panic.

Jerry Leonard, an analyst with Martin Labbe Associates, said he expected durable goods to take a hit after the September 11 terrorist attacks on New York and Washington. He added that the 8.5% fall in durable goods orders – the lowest level in five years – should not repeat itself in the following months.

“We expected durable goods to fall – and we expect growth again starting in the second quarter 2002,” Leonard told Fleet Owner. “I would expect durable goods orders to continue falling in the fourth quarter, although not as sharply.”

Shipments of all durable goods fell in September by 5.5%, the biggest drop for which records are available. The level, at $175.5 billion, is the lowest since March 1997. The Commerce Department said the drop may reflect disruptions in air transportation and border crossings after the attacks.

Since most durable goods are carried by private fleets, Leonard said he expects those to be hit hardest. He added that the carriers that deliver goods from the store to the customer will also be impacted, though store carriers can make delivery rounds in specific areas and not worry about having to make full runs.

Leonard added that there are some signs for an economic rebound for carriers, such as automobile sales for the month of October.

“We don’t have official numbers yet, but 0% financing on new automobiles has done well so far for getting people in to buy,” Leonard said. “It shows consumers are shaken, but not out of the game if they’re buying new autos because that is still a big commitment.”

He also thinks the Federal Reserve will wind up making another cut in interest rates, by 25 basis points, when it meets next week. It is rumored to be ready to make its 10th cut in the rates for 2001, which would lower the federal funds rate to 2.25% and the seldom-used discount rate to 1.5%.

“There is room for them to do that,” he said. “If you look at the 1970s, the Fed was doing the same thing with interest rates because of inflation, and right now there is almost no sign of inflation.”

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