Today’s Durable Goods rate of change acceleration takes that data series from awful to not bad. Directionally that might be very good; especially if the post #TrumpTrade data (this is OCT, pre-election) accelerates again in NOV = bullish for US and bond yields:
- Headline up a big +4.8% sequentially and flat at +2.1% YoY with the majority of subaggregates (Ex-Transports, Ex-Defense, Ex-Defense & Aircraft) improving but……
- Non-Defense Aircraft – Private Sector Aircraft Orders (gray shaded box in table below) were the primary source of strength supporting the headline and the subaggregates. Order growth was +94.1% MoM (+26% YoY). Its not a huge component but it’s one of the most volatile underlying series and outsized moves do impact the headline.
- Durables Ex-Defense & Aircraft - which represents the closest proxy for actual household demand – was +0.3% sequentially, improving to +0.6% YoY and marking the 1st month of positive growth in the last 8 months
Capital Goods, meanwhile, remained mojo-less …. Up +0.4% MoM (against an easy comp) but still down -4% YoY = 12th consecutive month of negative growth and the 21st month of negative growth in the last 22.
Elsewhere, the Univ. of Michigan consumer confidence reading accelerated from 91.6 to 93.8 with the expectations component registering its largest sequential increase in over 4 years. That’s not Ex-Trump. That’s a NOV reading.
It’s not unusual for election year confidence readings to demonstrate an October slump-November rebound pattern but, notably, this morning’s gain represented the largest November increase since the 1992 election.
Whether resurgent optimism proves a durable phenomenon or manifests in a sustained inflection in domestic consumerism remains to be seen but gross dismissal of step function increases in a reflexive macro/market environment is rarely prudent risk management.