Durable Goods, Jobless And Consumer Confidence Reports Released
December 28, 2001
Orders for durable goods in the United States took a nosedive in November and the latest numbers on initial jobless claims climbed slightly, but consumers are feeling better about the economy.
The Commerce Department reports a drop of 4.8 percent in orders for items designed to last three years or more, which had skyrocketed to a revised 12.5 percent in October. The news was hardly surprising to analysts polled by Reuters, who predicted a drop of 4.6 percent percent for November.
Most of the drop, however, was due to a 57.9 percent drop in new orders for airplanes, stemming from slackened demand for defense aircraft and parts, which masked gains elsewhere. In contrast, orders for aircraft increased a whopping 221.1 percent in October. Excluding the defense orders sector, November durable goods orders rose 2.7 percent. If you exclude the entire volatile transportation category, which can swing widely from month to month, durable-goods orders rose a solid 1.1 percent, the first back-to-back increase since November-December 1999.
Newport Communication’s Senior Economist Jim Haughey says the 0.2 percent increase in November durable goods shipments and a pickup in orders will likely mean that fourth quarter total shipments will almost equal those seen in the third quarter, making right now the bottom of the business cycle in manufacturing.
Also, inventories fell another 1.1 percent in November. This drops the inventory/sales ratio to 1.58, identical to last November. Durable goods manufacturers now have only about two days of surplus inventory. This will be used up in three months at the November pace of shipments gains and inventory destocking.
The durable goods and inventory news came on the same day the Labor Department reported the number of Americans lining up to file for unemployment benefits climbed by 7,000 during the week ended Dec. 22. The news reverses three straight weeks of declining claims in a sign the labor market remains soft.
Initial claims for unemployment benefits rose to 392,000 for the week, up from a revised 385,000 during the prior week. However, the number is smaller than Wall Street economists were forecasting. They predicted claims of 401,000 for the latest week. The number is also in sharp contrast to initial jobless claims in October, which hit as high as 500,000 per week.
Haughey says at 400,000 new claims a week, the labor market is strong enough so that unemployment among experienced workers - covered by unemployment insurance -will be steady or rise very modestly. “But there are not enough new jobs now for people entering or reentering the labor force, so the unemployment rate will continue to rise until the economy has been expanding for many months,” he says.
Meantime on Friday, the New York based conference board reported its Consumer Confidence Index rose to 93.7 in December from a revised 84.9 in November. The number is much higher than analysts were expecting, predicting a reading of 83. The November figure was the lowest since February 1994, when it reached 79.9.
The figure is based on a survey of 5,000 U.S households on how they feel about the current state of the country’s economy.