May 27, 2021

Durable goods orders fell 1.3% in April after rising 1.3% in March.  Orders had risen for eleven consecutive months before declining in April.  However, the drop is largely in the motor vehicle category as shortages of silicon chips are curtailing automobile production.

Frequently much of the change in durables is in the transportation sector — airplanes, cars, and trucks.  In April transportation orders plunged by 6.7 ( largely autos) after having fallen 3.1% in March.   Excluding the volatile transportation sector durable goods orders rose 1.0% in April and 3.2% in March.  Orders are bouncing back quickly and are far higher now than the were prior to the recession.

Given the results of the orders component of the Purchasing Managers Index durable goods orders should continue to climb.

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And also from the Purchasing Managers report the ratio of orders to inventories is the highest it has been in a decade.  Manufacturers need to step up the pace of production to satisfy demand.  Their problems will be finding an adequate supply of skilled labor, coping with shortages of materials arriving from suppliers, and complying with social distancing requirements on the factory floor.  Production is not being constrained by a shortage of demand. Orders are robust.   Instead, manufacturers are having to deal with very evident supply constraints.

We expect 10.0% GDP growth in Q2.  Look for 8.0% GDP growth in 2021..

Stephen Slifer

NumberNomics

Charleston, SC