A Deep Dive into Durable Goods Orders
Earlier this morning I posted an update on the March Advance Report on March Durable Goods Orders. This Census Bureau series dates from 1992 and is not adjusted for either population growth or inflation.
Let’s now review the same data with two adjustments. In the charts below the red line shows the goods orders divided by the Census Bureau’s monthly population data, giving us durable goods orders per capita. The blue line goes a step further and adjusts for inflation based on the Producer Price Index, chained in today’s dollar value. This gives us the “real” durable goods orders per capita. The snapshots below offer a quite sobering corrective to the standard reports on the nominal monthly data (which itself was significantly below expectations).
Here is the same chart, this time ex Transportation.
Now we’ll exclude Defense orders.
And finally we’ll exclude both Transportation and Defense for a better look at core durable goods orders.
As these charts illustrate, when we study durable goods orders in the larger context of population growth and also adjust for inflation, the data becomes a coincident macro-indicator of a major shift in demand within the U.S. economy. It correlates with a decline in real household incomes, as illustrated in my analysis of the most recent Census Bureau household income data:
The secular trend in durable goods orders also helps us understand the trend of declining GDP that I’ve illustrated elsewhere. See especially the most recent update on GDP.
By all four of the metrics above, the real per-capita demand for durable goods has increased substantially since the trough at the end of the last recession. But orders remain far below their respective peaks near the turn of the century and earlier.
Doug Short Ph.d is the author of dshort.com.