October 2014 U.S. Home Sales, Inventory and Prices

Click image for larger view 

Click image for larger view

Sales of new single-family homes in October edged up by 3,000 units (+0.7%) relative to the previous month, to a seasonally adjusted and annualized rate (SAAR) of 458,000. Data for September was revised down from 467,000 to 435,000 units, while data for August was trimmed further (to 453,000 -- considerably below the original 504,000 units). Sales in October were 2.8% above year-earlier levels. Meanwhile, the median price of new homes sold shot up by $43,300 (+16.6%) to $305,000, more than recouping September’s $26,000 drop; October's median price is well above the previous high of $279,300 set back in April 2013. The average price of homes sold jumped by an even more incredible $86,900, as approximately half of the homes sold were valued at $300,000 or higher. Although single-family starts rose faster than sales in October, the three-month average ratio of starts to sales dropped to 1.47. Click here for our post on October’s housing permits, starts and completions. 

Click image for larger view

Single-unit completions plummeted by 47,000 units (-7.4%) in October. Nonetheless, new-home inventory expanded both in absolute (+2,000 units) and months-of-inventory (0.1 month) terms. 

Click image for larger view

Existing home sales advanced in October (+80,000 units or 1.5%) to 5.26 million units (SAAR). With sales of new homes rising more slowly than existing homes, the share of total sales comprised of new homes slipped back to 8.0%. The median price of previously owned homes sold in October dropped again (-$800 or 0.4%) to $208,300. Inventory of existing homes shrank in both absolute (-60,000 units) and months-of-inventory terms (0.2 month). 

Click image for larger view

Housing affordability improved again in September because the median price of existing homes for sale fell by $8,800 (-4.0%) to $210,300. Concurrently, Standard & Poor’s reported that the U.S. National Index in the S&P/Case-Shiller Home Price indices posted a not-seasonally adjusted monthly change of -0.1% in September but a +4.8% change relative to a year earlier.

“The overall trend in home price increases continues to slow down,” said David Blitzer, chair of the Index Committee at S&P Dow Jones Indices. “The National Index reported its first negative monthly returns since December 2013 and its worst annual returns since December 2012 due to weaknesses in Washington D.C. and Boston. The West and Southwest, previously strong regions, are seeing price gains fade. The only region showing any sustained strength is the Southeast led by Florida; price gains are also evident in Atlanta and Charlotte.

“Other housing statistics paint a mixed to slightly positive picture,” Blitzer continued. “Housing starts held above one million at annual rates on gains in single family homes, sales of existing homes are gaining, builders’ sentiment is improving, foreclosures continue to be worked off and mortgage default rates are at pre-crisis levels. With the economy looking better than a year ago, the housing outlook for 2015 is stable to slightly better.” 

Click image for larger view

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

3Q2014 Gross Domestic Product: Second (Preliminary) Estimate

Click image for larger version

According to the Bureau of Economic Analysis’ (BEA) “preliminary” estimate, 3Q2014 growth in real U.S. gross domestic product (GDP) was upwardly revised to a seasonally adjusted and annualized rate of 3.9% -- up roughly 0.4 percentage point above the first (“advance”) 3Q estimate but 0.7% below 2Q’s 4.6%. This revision “slammed” expectations of a decline to 3.3% (ranging from +2.8 to 3.8%). All four categories -- personal consumption expenditures (PCE), private domestic investment (PDI), net exports (NetX), and government consumption expenditures (GCE) -- contributed to 2Q growth.

The categorical contributions to the headline number bear little resemblance to last month’s report. For example:

-- The significant inventory draw-down reported a month ago almost vanished (dropping to a mere -0.12% impact on the headline number, compared to -0.57% last month).

-- Improving fixed investments added +0.23% to the headline (from +0.74 to 0.97%), with nearly all of that improvement from spending for commercial equipment.

-- Consumer spending for goods was also reported to be growing by an additional +0.27% in this report (from +0.70 to 0.97%), while consumer spending for services was essentially unchanged (+0.02%).

-- Finally, while exports were revised modestly lower (from +1.03 to 0.65%), a small decline in imports (from +0.29 to 0.12%) partially offset the net decline in trade’s contribution.

For this report the BEA bumped up its estimate of annualized net aggregate inflation (to 1.40% instead of the “advance” report’s 1.28%). By comparison, the growth rate of the Bureau of Labor Statistics’ concurrent seasonally adjusted CPI-U index was -0.10% (annualized); meanwhile, the price index reported by the Billion Prices Project (BPP) was -0.18%. Were the BEA’s nominal estimates corrected for inflation using the CPI-U, real 3Q GDP would have grown by 5.42%; if using the BPP inflation rate, growth would have been 5.52%.

Growth in real final sales of domestic product, the BEA’s “bottom line” indicator of economic health (which excludes the ever-volatile inventories) was shaved to 4.1% (from 4.2% last month). 

Click image for larger version

Conclusions from this report include:

-- As mentioned last month, the Federal Reserve’s argument for completing its QE taper was strengthened. An economy growing at 3.9% is presumably healthy enough to be “weaned” off central bank stimulus.

-- Rapidly changing dollar-based commodity prices (and more specifically energy prices) are likely playing havoc with both the BEA’s inventory and net import/export data, both of which changed materially in this revision. While one might expect inventories to be valued exclusively using some variation of book-value FIFO accounting logic, they are in fact additionally impacted by an “inventory valuation adjustment” (or “IVA”) that utilizes price changes from a “Fisher formula” (that according to the BEA’s notes “incorporates weights from two adjacent quarters; quarterly indexes are adjusted for consistency to the annual indexes before percent changes are calculated”) when converting inventory values from “nominal” to “real.” For this reason, rapidly changing dollar-based price levels can cause “real” inventories and net import/export data to fluctuate even if physical quantities remain relatively constant -- providing temporary “noise” that duly reverses in subsequent quarters.

-- From a global perspective, this reported growth is extraordinary. Again at face value, this report shows an economy isolated (if not benefiting through falling dollar-based commodity prices) from softening global economies.

-- That said, consumers are not spending as if the U.S. economy is healthy and sustainable. Consumers generated well less than half of the headline growth even though they are still over two-thirds of the economy. And half of the previously reported growth in real per-capita disposable income vanished in this revision -- explaining to some extent why consumers have remained wary.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

October 2014 Consumer and Producer Price Indices (incl. Forest Products)

Click image for larger version

The seasonally adjusted Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in October. Gasoline and other energy indexes declined, offsetting increases in shelter and an array of other indices to leave the seasonally adjusted all-items index unchanged. The gasoline index fell for the fourth month in a row, declining 3.0%, and the indices for natural gas and fuel oil also decreased. The food index rose slightly in October, with major grocery store food groups mixed.

The index for all items less food and energy increased 0.2% in October. Besides the shelter index, airline fares, household furnishings and operations, medical care, recreation, personal care, tobacco, and new vehicles were among the indices that increased. The indices for used cars and trucks and for apparel declined in October. 

The all items index increased 1.7% over the last 12 months, the same increase as for the 12 months ending September. The index for all items less food and energy increased 1.8% over the span, and the food index rose 3.1%. In contrast, the energy index declined 1.6% over the last 12 months.

The seasonally adjusted Producer Price Index for final demand (PPI) rose 0.2% in October. This increase followed a 0.1% decline in September and no change in August. On an unadjusted basis, the index for final demand advanced 1.5% for the 12 months ended in October, the smallest 12-month increase since a 1.2% rise in February 2014.

The index for final demand services moved up 0.5% in October, the largest increase since a 0.5% rise in July 2013. A 26.1% jump in margins for fuels and lubricants retailing accounted for nearly four-tenths of that 0.5% increase. (Trade indexes measure changes in margins received by wholesalers and retailers.) At the same time, the index for final demand goods moved down 0.4%, the fourth consecutive decrease. Over eight-tenths of the 0.4% decline in prices for final demand goods can be attributed to the index for gasoline, which dropped 5.8%.  

Click image for larger version

Of the price indices we track, only Wood Fiber rose in October (relative to September); coincidentally, Wood Fiber also reached a new all-time high index value. Compared to a year earlier, all indices except Pulp, Paper & Allied Products were higher. 

Click image for larger version

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

October 2014 Residential Permits, Starts and Completions

Click image for larger view 

Click image for larger view

Total housing starts retreated in October, to a seasonally adjusted and annualized rate (SAAR) of 1.009 million units. That level was 29,000 fewer (-2.8%) than September’s 1.038 million units. All of the decrease in total starts occurred in the multi-family component (-57,000 units or 15.4%); single-family starts rose by 28,000 units (4.2%). 

Click image for larger view

The year-over-year percentage change in total starts slowed in October (+7.7%). Single-family starts were 16.3% above their year-earlier level; the more volatile multi-family component fell to 6.8% below its September 2013 level. On a year-to-date basis, all components are above levels seen during the same months in 2013. 

Click image for larger view 

Click image for larger view

Completions decreased by 85,000 units (8.8%) in October, to 881,000 units SAAR. Over half of the decrease occurred in the single-family component (-47,000 units or 7.4%); the multi-family component shrank by 38,000 units (-11.4%). Total completions were 8.7% above their year-earlier level. On a year-to-date basis, total completions are 16.3% higher than the same months in 2013. 

Click image for larger view 

Click image for larger view

Total permits were the bright spot in October, increasing by 49,000 units (4.8%), to 1.080 million SAAR. Over eight-tenths of the increase occurred in the multi-family component (40,000 units or 10.0%); single-family permits edged higher (9,000 units or 1.4%). October total permits were 2.7% above year-earlier levels; on a year-to-date basis, total permits were 3.5% higher than the same months in 2013.

It appears the slide in the rate of annual growth in total permits seen since late 2012 has ended, but it is still too early to tell whether the trend is poised to turn back up. That may be the case, given the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) jumped four points in November (to 58), one point shy of September’s nine-year high of 59. An index value above 50 means more builders feel the market is good than feel it is poor.

“Growing confidence among consumers is what’s fueling this optimism among builders,” said NAHB Chairman Kevin Kelly. “Members in many areas of the country continue to see increasing buyer traffic and signed contracts.” 

Click image for larger view

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

October 2014 Industrial Production, Capacity Utilization and Capacity

Click image for larger version

Industrial production edged down 0.1% in October after having advanced 0.8% in September. In October, manufacturing output increased 0.2% for the second consecutive month. The index for mining declined 0.9% and the output of utilities moved down 0.7%. At 104.9% of its 2007 average, total industrial production in October was 4.0% above its level of a year earlier. Wood Products output rose by 0.8% while Paper fell 0.2%. 

Click image for larger version 

Click image for larger version 

Click image for larger version

Capacity utilization for the industrial sector decreased 0.3 percentage point in October to 78.9%, a rate that is 1.2 percentage points below its long-run (1972–2013) average; Wood Products and Paper rose by, respectively, 0.3 and 0.1%. 

Click image for larger version

Capacity at the all-industries and manufacturing levels moved higher by, respectively, 0.3 and 0.2%. Wood Products extended its ongoing upward trend (since July 2013) when increasing by 0.4%. Paper, on the other hand, contracted by 0.2% to another new low.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

November 2014 Macro Pulse -- Economy Steady amid Political Sea Change

Despite momentous mid-term U.S. election results in early November that augur a possible change in the political climate, little has changed in the nation’s economic trajectory. Recent data releases offered a mixed bag of positive and negative news, but on net leaned positive. For example, …

Click here to read the rest of the November 2014 Macro Pulse recap.

The Macro Pulse blog is a commentary about recent economic developments affecting the forest products industry. The monthly Macro Pulse newsletter summarizes the previous 30 days of commentary available on this website.

September 2014 International Trade (Pulp, Paper & Paperboard)

Click image for larger view

On a month-to-month basis, September's net exports reversed August's 10.3 percent increase, posting a 14.3 percent decrease. September's drop reasserted the downward string of month-to-month declines that occurred between March and July. September year-to-date (YTD) net exports trail prior YTD levels by 380,000 tonnes (2.6 percent), falling further behind August's YTD pace. Consistent with slowing global growth, lower YTD exports accounted for over two-thirds of the change from August YTD. Meanwhile, U.S. imports YTD increased from the prior month's pace, closing 2.8 percent higher than the prior year's level.

Cumulative activity over the six months ending September 2014 shows net exports are 1.6 percent below the pace seen during the same period in 2013; cumulative net exports are lower due to higher imports. Six-month trend-lines were fit to the data to study recent trends. September's six month trend-line on net exports became more negative compared to August's six month trend-line. Exports’ six-month trend also became more negative compared to the August's trend-line. The six-month import trend-line became more positive in September. 

Click image for larger view

In terms of notable shifts in country-level details:

Pulp exports (19.661 million tonnes YTD) are essentially flat (-0.04 percent) compared to last year's YTD levels. China remains the chief destination of U.S. pulp by a wide margin, representing 55 percent of YTD shipments. Nevertheless China's exports have declined by 4.0 percent YTD compared to the same period in 2013. India narrowly surpassed Mexico as the second-ranked destination for U.S. pulp exports, representing 7.4 percent of YTD exports compared to Mexico's 7.3 percent share. While Mexico's receipt of U.S. pulp export are up nearly 10 percent YTD and India's are up by nearly 27 percent. Among 2013's top 10 destinations, the most significant change is Indonesia where U.S. pulp exports are over 46 percent higher than prior YTD levels, causing it to jump from the ninth-ranked 2013 YTD destination to the sixth-ranked 2014 YTD destination. 

Click image for larger view

Paper and paperboard exports (1.808 million tonnes) dropped by 7.7 percent on a YTD basis. Among 2013's top 10 destinations, the "loss leader" is India (-87,000 tonnes, or 46.5 percent from prior YTD), followed by Mexico (-44,000 tonnes, or 9.9 percent from prior YTD), Japan (-17,000 or 11.5 percent) and China (-14,000 or 26.7 percent). Bucking the general decline in paper and paperboard exports, Canada's receipt of U.S. paper and paperboard exports are up by 71,000 tonnes (+16.9 percent). Costa Rica and Guatemala are also receiving higher levels of U.S. paper and paperboard exports; Costa Rica's YTD receipts are up by over 18,000 tonnes (+43.0 percent) and Guatemala is up over 4,000 tonnes (+11.8 percent). 

Click image for larger view

Pulp imports (4.805 million tonnes YTD) increased 0.3 percent compared to prior YTD levels. Canada and Brazil, the 1st and 2nd ranked pulp import sources, respectively, account for 94 percent of the pulp imported. Despite their top ranking, both have logged declines in pulp imported compared to prior YTD levels. On the other hand, Chile, while maintaining its number three rank, has increased its imports YTD by over 86 percent. As a supply source, Indonesia has climbed from being the twelfth-ranked supplier during the first nine months of 2013 to the ninth-ranked supplier during the first nine months of 2014, posting a YTD increase of 66 percent. 

Click image for larger view

Paper and paperboard imports (2.570 million tonnes YTD) have expanded by over 8 percent year-to-date compared to prior YTD activity. Once again Canada leads the way, accounting for 88 percent of the total import volume and 68 percent of the YTD increase (133,000 of 194,000 tonnes). One notable development on a percentage basis is Australia, which has vaulted from being the 29^th ranked supplier during the first nine months of 2013 to the 7^th ranked supplier during the first nine months of 2014, posting an eye-popping increase of 85,889 percent -- from 19 tonnes to 16,682 tonnes.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

October 2014 Employment Report

Click image for larger view

According to the Bureau of Labor Statistics’ (BLS) establishment survey, non-farm payroll employment increased by 214,000 in October -- well below MarketWatch’s and Reuters’ respective expectations of 243,000 and 231,000. Also, the unemployment rate (from the BLS’s household survey) ticked down to 5.8 percent on the basis of increased employment rather than the more typical reason that people dropped out of the labor force.

Employment rose in virtually all supersectors. Of particular interest, construction added 12,000 jobs while manufacturing added 15,000. However, 130,000 (over 60 percent) of all non-farm jobs created were in sectors (i.e., Professional & Business Services, Education and Health Services, and Leisure & Hospitality) that generally command below-average wages. In fact, one analyst observed that the number of bartenders and wait staff is coming close to equaling the number of manufacturing workers. The change in total nonfarm payroll employment for August was revised from +180,000 to +203,000, and the change for September was revised from +248,000 to +256,000. With these revisions, employment gains in August and September combined were 31,000 more than previously reported. 

Click image for larger view

Other internals of the report were modestly upbeat. For example, the employment-population ratio rose slightly at the same time the number of employment-age persons not in the labor force retreated to 92.4 million from its recent peak of 92.6 million. 

Click image for larger view

Also, the labor force participation rate edged up by 0.1 percent. Average hourly earnings of all private employees rose by $0.03, resulting in a 2 percent year-over-year increase. For all production and nonsupervisory employees (pictured above), wages rose by $0.04/hour (+2.2 percent YOY). With CPI-U running at an official annual rate of 1.7 percent, wages are technically keeping up with price inflation. 

Click image for larger view

Finally, although the rate of increase in full-time jobs and the rate of decrease in part-time jobs both moderated, at least both metrics continued to trend in the desired direction. 

Click image for larger view

The figure above presents a variety of forecasts related to when employment might converge with the number of jobs that likely would exist had the recession not occurred (gray line).

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

September 2014 International Trade (Softwood Lumber)

Click image for larger view

Softwood lumber exports decreased by 5 MMBF (3.2 percent) in September while imports rose by 60 MMBF (5.8 percent). Exports were 20 MMBF (12.8 percent) below year-earlier levels; imports were 172 MMBF (18.7 percent) higher. 

Click image for larger view

The rest of North America (i.e., Canada and Mexico) was once again the primary destination for U.S. softwood lumber exports in September, although Asia (especially China) was a close second; Canada was also the largest single-country destination. Year to date (YTD), exports to China were up just 11 percent relative to the same period in 2013 (down from +21 percent YOY in August). Meanwhile, Canada was the source of nearly all (97.2 percent) softwood lumber imports into the United States. Overall, YTD exports were up 3.6 percent compared to the same period in 2013, while imports were up 10.3 percent. 

Click image for larger view 

Click image for larger view

Roughly 45 percent of U.S. softwood lumber exports left the country through West Coast (primarily Seattle, WA) customs districts in September. At the same time, Great Lakes customs districts (especially Duluth, MN) handled over 69 percent of the softwood lumber imports coming into the United States. 

Click image for larger view 

Click image for larger view

Southern yellow pine comprised 21.6 percent of all softwood lumber exports in September, followed by Douglas-fir with 19.4 percent.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

September 2014 International Trade (General)

Click image for larger view

Total September exports of $195.6 billion and imports of $238.6 billion resulted in a goods and services deficit of $43.0 billion, up from $40.0 billion in August, revised. September exports were $3.0 billion less than August exports of $198.6 billion. September imports were $0.1 billion more than August imports of $238.6 billion.

In September, the goods deficit increased $2.4 billion from August to $62.7 billion, and the services surplus decreased $0.6 billion from August to $19.6 billion. Exports of goods decreased $2.6 billion to $136.1 billion, and imports of goods decreased $0.1 billion to $198.7 billion. Exports of services decreased $0.4 billion to $59.5 billion, and imports of services increased $0.2 billion to $39.9 billion.

The goods and services deficit increased $0.8 billion from September 2013 to September 2014. Exports were up $5.3 billion, or 2.8 percent, and imports were up $6.1 billion, or 2.6 percent.

Excluding petroleum, the U.S. trade deficit rose to $48.3 billion to mark the highest level in four months. 

Click image for larger view

On a global scale, data compiled by the Netherlands Bureau for Economic Policy Analysis showed that world trade volume decreased by 0.8 percent in August (from the prior month) while prices fell by 1.1 percent.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

October 2014 ISM Reports

Click image for larger version

The Institute for Supply Management’s (ISM) monthly opinion survey showed that economic activity in the U.S. manufacturing sector recovered in October the ground lost in September. The PMI jumped back to 59.0 percent, an increase of 2.4 percentage points from September’s 56.6 percent (50 percent is the breakpoint between contraction and expansion). ISM’s manufacturing survey represents under 10 percent of U.S. employment and about 20 percent of the overall economy. The pickup in activity was primarily supported by increased new and backlogged orders, and slower supplier deliveries (implying suppliers may be having difficulty keeping up with orders).

Bradley Holcomb, chair of ISM’s Manufacturing Business Survey Committee said comments from the respondent panel “generally cite positive business conditions, with growth in demand and production volumes.”

Click image for larger version

Wood Products was unchanged in October, as increased production was offset by declines in new and backlogged orders; “production is oversupplying demand,” one respondent indicated, “and prices have softened.” Paper Products’ expansion, by contrast, exhibited wide-spread support among the sub-indices. 

The pace of growth in the non-manufacturing sector -- which accounts for 80 percent of the economy and 90 percent of employment -- retreated again in October. The NMI registered 57.1 percent, 1.5 percentage points lower than September’s 58.6 percent; only the employment and imports sub-indices were higher in October than September. “The majority of the respondents’ comments reflect favorable business conditions,” said Anthony Nieves, chair of ISM’s Non-Manufacturing Business Survey Committee; “however, there is an indication that there continues to be a leveling off from the strong rate of growth of the preceding months.” 

Click image for larger version

All three service industries we track reported expansion in October, although Ag & Forestry’s support among the sub-indices was not that meaningful.

Commodities up in price included envelopes and paper products. Some respondents indicated paying more for fuel, others less. Lumber was the only relevant commodity down in price. No relevant commodities were in short supply.

It is interesting to note that while ISM’s NMI and Markit’s U.S. Services PMI paralleled each other in October (i.e., growth slowed), ISM’s PMI and Markit’s U.S. Manufacturing PMI moved in opposite directions (i.e., ISM increased while Markit decreased). Time will tell which organization’s assessment of U.S. manufacturing is more accurate.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

September 2014 Manufacturers’ Shipments, Inventories, and New & Unfilled Orders

Click image for larger view 

Click image for larger view

According to the U.S. Census Bureau, the value of manufactured-goods shipments increased $0.7 billion or 0.1 percent to $503.4 billion in September. Shipments of durable goods increased $0.7 billion or 0.3 percent to $246.2 billion, led by transportation equipment. Meanwhile, nondurable goods shipments increased $0.1 billion or less than 0.1 percent to $257.2 billion, led by chemical products. Wood and Paper shipments fell by 1.0 and 0.1 percent, respectively. 

Click image for larger view

Inventories increased $1.5 billion or 0.2 percent to $655.2 billion (the highest level since the series was first published on a NAICS basis). The inventories-to-shipments ratio was 1.30, unchanged from August.

Inventories of durable goods increased $1.7 billion or 0.4 percent to $404.6 billion, led by transportation equipment. Nondurable goods inventories decreased $0.1 billion or slightly to $250.6 billion, led by petroleum and coal products. Inventories of Wood and Paper expanded by 0.1 and 0.4 percent, respectively. 

Click image for larger view

New orders decreased $2.8 billion or 0.6 percent to $499.4 billion. Excluding transportation, new orders decreased less than 0.1 percent -- the fourth drop in the last five months. Durable goods orders decreased $2.8 billion or 1.1 percent to $242.2 billion, led by transportation equipment. New orders for nondurable goods increased $0.1 billion or slightly to $257.2 billion.

Prior to July, as can be seen in the graph above, real (inflation-adjusted) new orders had been essentially flat since early 2012, recouping roughly 75 percent of the losses incurred since the beginning of the Great Recession. With July’s transportation-led spike now in the rearview mirror, new orders have dropped back to around 72 percent or their December 2007 high. 

Click image for larger view

Unfilled durable-goods orders increased $3.7 billion or 0.3 percent to $1,168.7 billion, led by computers and electronic products. The unfilled orders-to-shipments ratio was 6.71, unchanged from August. Real unfilled orders, which had been a good litmus test for sector growth, show a much different picture; in real terms, unfilled orders in June were back to just 79 percent of their December 2008 peak. Real unfilled orders jumped to 102 percent of the prior peak in July, thanks to the largest-ever batch of aircraft orders, hence, this metric is likely to remain elevated for several years.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.