US: April Durable goods orders look good - but they aren't really – ING

Rob Carnell, Chief International Economist at ING, suggests that the important part of US durable goods orders release is the core capital goods shipments and orders and there is no conclusive improvement from weak levels here.

Key Quotes

“US GDP has not been helped in recent quarters by two consecutive contractions in business investment. And tracking this is key to understanding whether the slowdown in the US economy since 2Q15 is likely to resurface, following what has been a good start to 2Q16 so far.

These core orders and shipments figures remain very weak on a three month annualised basis. Core orders are running at a -8.7% pace (3mma), and shipments -10.6%. Of course, these moving averages are weighed down by the weakness of 1Q16, so focussing just on the April month-on-month changes, the two measures respectively changed by -0.8% and +0.3%...hardly conclusive.

Some further drag on the economy may be evident in the inventory figures, which declined by a further 0.2% MoM, the fourth consecutive decline.

More evidence on the state of US activity is due next week from the personal spending figures – these should reflect recent strong retail sales numbers and be quite good. And we may also see some further evidence of manufacturing recovery in the forthcoming Manufacturing ISM data.

As far as the June Fed decision goes, this data has not taken the argument very far forward. We remain slightly in favour of a July hike, but the outcome remains data dependent. Wages figures in next Friday's jobs report could prove pivotal. Keep watching the screens.”