Jan 29, 2020

The better-than-expected but also terrible durable goods report

Photo: Buena Vista Images/Getty Images

Orders for U.S. durable goods — long-lasting items like sheet metal or motors — rose 2.4% in December, but 90% of that increase was from government defense purchases. Excluding that category, orders fell 2.5%.

Worth noting: New orders for nondefense capital goods excluding aircraft fell 0.9%, the biggest drop in eight months.

Why it matters: Business investment was the missing leg of the table for much of last year as the U.S.-China trade war and other geopolitical uncertainties like Brexit kept many companies from investment spending, forcing consumers to hold up the economy alone.

  • Tuesday's durable goods report shows that theme likely lasted through the year, and may be a negative drag on U.S. economic growth in 2020.

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What has happened to inflation

Data: Bureau of Labor Statistics, reproduced from Deutsche Bank; Chart: Axios Visuals

For the past 25 years, the U.S. has seen zero inflation in goods and 3% to 4% inflation in services.

Details: Goods are things you buy in stores and services are housing, health care and education, Deutsche Bank Securities chief economist Torsten Slok notes. The weight to goods in the CPI index is 1/3 and the weight to services is 2/3.

Trump's post-virus, pre-election boom

Illustration: Aïda Amer/Axios

The Wuhan coronavirus outbreak is already scuttling supply chains and wreaking havoc on companies around the world that do business in China, but if analysts' projections are correct, the rebound from the virus could help propel the U.S. economy to new heights right around the time of the 2020 presidential election.

Why it matters: With President Trump touting the stock market's performance and jobs growth as key accomplishments, that bounceback could play a major role in the election's outcome.

Fed manufacturing indexes jump in January

Data: FactSet; Chart: Naema Ahmed/Axios

The Richmond Fed's January manufacturing survey recorded its highest reading in almost a year and a half on Tuesday.

Why it matters: The survey is considered a potential leading indicator of overall manufacturing because it is released close to month-end and may offer clues on national manufacturing readings like those from ISM and IHS Markit.

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