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Durable Goods, Consumer Spending & More Early Data

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Friday, September 27, 2019

A bevy of new economic data has hit the tape ahead of Friday’s opening bell, with a little bit of everything for everyone: Durable Goods were up, although Business Investment was down. Consumer Spending was positive but weaker than we’ve seen, while Core Inflation is flat. Here are the details:

August Durable Goods Orders brought a headline of +0.2%, better than the -0.1% expected but notably lower than the +2.1% reported in July. Where these figures get interesting is in the sub-headlines: stripping out volatile Transportation costs, this number springs up to +0.5%, although ex-Defense it drops to -0.6%. That’s a 110-basis point drop on military aircraft alone. Overall non-Defense, ex-Aircraft came in at -0.2%, lower than the expected 0.0%.

This last read gives insight into Business Investment, which, as we’ve seen in other data of late has been coming up a bit short. This may have a bit to do with the wearing off of corporate tax cuts passed through Congress a year ago Christmastime; though we did see a bit of a pop in investment — and certain industries benefited (albeit temporarily) from being able to hire needed workforce with the freed-up capital — we look to be back at long-term trends. By the way, the last time Business Investment came in at a negative figure for the month was back in April of this year.

Consumer Spending for August rose +0.1% — lower than the expected +0.3% and the previous month’s downwardly revised +0.5%. Again, that we’re seeing positive reads for the consumer — who has been doing most of the heavy lifting in the economy over the past year — cannot be construed as bad news. That said, it’s the lowest read on consumer spending in six months.

August Core Inflation was unchanged on the month, following +0.2% reported in July. This is pretty well in-line with the +0.1% estimate. Year over year, the +1.4% number is exactly in-line with expectations.

Clearly, there is plenty to digest from this data. The good news is, there won’t be many distractions from things like earnings reports — although Micron (MU - Free Report) posting a disappointing outlook yesterday after the close is being digested in today’s pre-market presently — so that these points of information may help plot out the direction of the U.S. economy as a whole going into calendar Q4.

Mark Vickery
Senior Editor

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