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Home Publications Blogs Beat the Press Secret Commerce Department Report Shows the Economy May be Faltering

Secret Commerce Department Report Shows the Economy May be Faltering

Thursday, 01 March 2012 07:44

Actually, it wasn't secret, it's right here on the Census Bureau's website, but for some reason no one in the media thought it was worth reporting a drop in durable goods orders of 4.0 percent in January. I am always the first to say that we should not make too much of any single report. Monthly data are often erratic and if one report seems out of line with most other data, odds are that the report was driven by some flukish factor or just sampling error.

Nonetheless, this is a big drop that can't be explained by the usual suspects. New orders excluding transportation (airplane orders are especially erratic) fell by 3.2 percent. Excluding military goods, new orders fell by 4.5 percent, so this is not a result of the peace dividend. The weather goes the wrong here since January was unusually warm this year meaning that businesses were not shut by snow storms. New orders for non-defense capital goods (i.e. investment) fell by 6.3 percent, or 4.5 percent if we exclude aircraft.

In short, this is an unambiguously bad report. My view is that it is probably an anomaly. We will perhaps see upward revisions in the second report for January or a big bounceback in the February numbers. But, this report definitely deserved some attention. It might seem rude to spoil the celebrations over our 3.0 percent growth rate last quarter, but that is what reporters are supposed to do.

Comments (7)Add Comment
WSJ says 100% depreciation expense tax benefit expired Dec 31st.
written by AndrewDover, March 01, 2012 7:18
The WSJ said:

"Here’s some quick analysis from Peter Boockvar of Miller Tabak & Co:

"Jan Durable Goods were well below expectations in what I can only guess is the hangover from the Dec 31st expiration of the 100% depreciation expense tax benefit. There is only a 50% tax write off in 2012…We may be seeing the aftermath of the pull forward of corporate cap ex into late 2011 due to companies taking advantage of the expired depreciation expense tax credit. Thus, cap spending wasn’t as strong as it seemed in late 2011 and likely not as weak as it seems in Jan 2012."

Please hire somebody!, Low-rated comment [Show]
We Have A Whiner!
written by Jeffrey Stewart, March 01, 2012 8:59
Hey how ya goin' there, Buddy?

Dr. Baker donates his time to providing analyses and critiques of economics news stories. It's reasonable supposing he has other important things to do leaving less time for proofreading. The meaning of the passage is discernible so there shouldn't be a problem understanding the point.
written by Mark Jamison, March 01, 2012 7:24
How does January generally compare? Obviously weather can affect January numbers although this year has been mild. Do tax consequences, as one poster pointed out have a chilling affect on January numbers historically?
As you point out single reports lack context so is there a contextual way to give this report more or less weight?
Please fire somebody!
written by David, March 01, 2012 7:26
Dear Dr. Baker, please fire Buddy Boy as a reader of your blog. He seems to miss the fact that this is a BLOG and not a formal publication.
grammar police, comma cops plus graph-o-rama at EP
written by Robert Oak, March 01, 2012 9:06
Ah, we too have been attacked by the grammar police, comma cops and typo tattletales. Aren't they fun?

To wit, our overview on the the January Durable Goods report others might be interested in.
The overview has our usual graph-o-rama which shows new orders monthly change is fairly statistically noisy, plus revised, sometimes significantly. While new orders is statistically noisy, shipments, not so much. It's core durable goods shipments that's really scary. I hope manufacturers just lost their paperwork.

God bless economic porn and eye candy.
written by tew, March 01, 2012 9:09
The first thing that came to mind was expiration of the 100% depreciation expense. Hopefully an economist has estimated how much CapEx this pulled forward. My guess is it could be substantial.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.