In April, retail sales data were disappointing, with industrial production falling for the fifth straight month while new orders for manufactured durable goods also declined. When I look at all the data from the different segments, I don’t really see any signs of a growing economy.
Durable Goods Manufacturers’ Shipment, Inventories, and Orders Disappoint
The U.S. durable goods report is an important gauge of economic growth. The U.S. durable goods report focuses on big-ticket items that are purchased by businesses and consumers that are meant to last at least three years. It is also a sign of business and consumer confidence.
On May 26, 2015, the U.S. Census Bureau reported that new orders for manufactured durable goods decreased $1.2 billion, or 0.5%, in April to $235.5 billion. Shipments of manufactured durable goods were down $0.1 billion, or 0.1%, to $240.5 billion; this is the third decline in the last four months. (Source: U.S. Census Bureau, May 26, 2015.)
One of the most important aspects of the durable goods orders number—and one that best reflects the sustainability in growth and the outlook for consumer spending—is the core durable goods number. That’s because the core durable goods number leaves out transportation and defense; and orders for aircraft are volatile and can severely distort the underlying trend.
Excluding transportation, new orders increased 0.5% $157.6 billion. Excluding defense, new orders increased 0.2% to $224.6 billion.
U.S Manufacturing Slowing Down
Industrial production in the U.S. fell for the fifth consecutive month in April. According to the data from the Federal Reserve, industrial production declined 0.3% month-over-month in April. (Source: Federal Reserve, last accessed, May 26, 2015.)
Retail Sales Also Disappoint in April
After barely growing in the first three months of 2015, U.S. retail sales were flat in April; and they continue to disappoint. Consumers cutting back on their purchases could be an indication that the economy is slowing down. (Source: U.S. Census Bureau, May 26, 2015.)
Business investment has been hurt by a stronger U.S. dollar cutting into exports and cutbacks in the energy and oil industry.
No matter how you look at all this, the U.S. economy is headed in the wrong direction. Time will tell more, but don’t rule out a recession in 2016 just yet.