6/27/12 May Real Durable Goods Orders, adjusted for inflation and not seasonally manipulated were up 4.1% over May 2011. That compares with a 4% gain in April. In adjusting for inflation, this measure attempts to represents actual unit volume of orders. Also, the use of actual, versus seasonally manipulated (SA) data allows an accurate view of the trend. With SA data, this may not be the case, since SA data can overstate or understate the real underlying change by attempting to fit a standardized curve. There are no such issues when using the actual data (see Why Seasonal Adjustment Sucks).
Overall new orders volume remains well below the 2004 through 2007 levels, and the uptrend has slowed from the dramatic rebound of 2009-10. However, 4% growth isn’t bad.
May is usually an up month. This May was up by 5% from the April level. That compares with a gain of 4.8%% in May 2011. The average May change over the previous 10 years was a gain of 2.6%%, so this year was not only better than last year, it was also significantly better than average. This year’s gain was the strongest since 2006, which had a 5.3% increase.
On a 3 month basis, May is usually stronger than February. The average gain for May versus February over the previous 10 years was 4%. Last year the gain was 7.4%. However, this year the May level was down 3.2% versus February. Is that a problem? On the chart, the trend looks stable, and so are the year to year gains, so for now, it looks like just noise within a normal range.
The headline number was a 1.1% gain month to month SA. That beat the conomists consensus of 0.5%. As usual, they were looking at the wrong data. The real time withholding tax data showed the economy gaining ground. Conomists were mostly convinced that it was slowing.
What does this mean for stocks? The trend of real durable goods orders tends to correlate well with stock prices with varying lead and lag times. The current trend of this index implies continued rangebound trading in stocks with, at best, a slight uptrend, unless and until the annual rate of change goes negative.
This post was developed from an update of the permanent chart page on Durable Goods and Factory Orders. Charts are updated whenever new data becomes available. Please bookmark for future reference.
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Last week’s selloff did less damage than it may have felt like. The drop stopped in the area of 3 crossing uptrend lines, ranging in length from short term to long term. Here’s what would tell us whether the uptrend is still in force, or signal that something evil this way comes.
I have added 8 new stocks to the swing trade chart pick list, including 2 shorts.
These reports are not investment advice. They are for informational purposes, for a broad audience of investment and trading professionals, and other experienced investors and traders. Chart pick performance changes week to week and past performance may not indicate future results, as you know. Trading involves risk, and these reports assume that you understand those risks and manage them according to your tolerance.