Trouble Ahead, Says Durable Goods

Market Trends - 24/09/2015

Indications of US economic vigor in the form of soaring GDP expectations are curtailed by recently broadcast real data. Monthly durable goods orders released today have largely failed to provide adequate justification for headlines that deem the economy flourishing, with the core figure posting a 0.00% result month-over-month. Regular durable goods fell -2.00%, though if you subtract aircraft and defense from this statistic, regular goods fell only -0.20%. The most worrisome evidence on shaky economic health came in the guise of a -2.00% slide in the key new orders component, which could be a clue that recession is closer than previously imagined. This is all in the face of the third and final reading of second quarter US GDP growth, which is anticipated by most to illustrate robust prosperity. Additional data against GDP expectations are the 4000-5000 jobs cuts recently announced by Caterpillar, a big player in global construction, that were implemented to fight weakness in the mining and energy sectors.

The agreed-upon target for tomorrow’s GDP reading is 3.70% growth. While the number presents an outward picture of the US economy in its prime, a quick look at the deeper factors that built this number reveal some key information. Should the reading prove to be excellent, perhaps part of it is based on circumstantial variables like the lower imports experienced in recent months, or the widespread commodity deflation which helps American manufacturers and consumers use their dollars more effectively. The sheer broadness of commodity deflation is not a favorable sign however, as purchasing power is eclipsed by increased competition in the manufacturing sector that is likely to spur job cuts. This story is in full effect for the British Pound, which is currently under pressure and underperforming key peers such as the US dollar.


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