Stalling, but Not Falling
- New Orders for Durable Goods decreased by just 0.1 percent in August as automotive orders eased.
- New Home Sales for August fell by 2.3 percent to a 295,000 unit annual rate.
- The Conference Board’s Consumer Confidence Index for September gained slightly to 45.4.
- The Case-Shiller Composite 20-City House Price Index for July was unchanged.
Economic data for the last week of the third quarter was consistent with a stalled economy, one that is not generating much momentum, but also is not rapidly deteriorating. However, many economic indicators remain at depressed levels so lack of deterioration is faint praise indeed. New orders for durable manufactured goods fell slightly in August, by 0.1 percent. This is normally a volatile series that is buffeted by big ticket items such as commercial aircraft and defense goods. This summer it has also been buffeted by the auto sector. New orders for motor vehicles and parts increased by 10 percent in July as automakers ramped up production as supply-chain bottlenecks eased. However, in August new orders for motor vehicles dipped by 8.5 percent, casting some doubt on the durability of the auto sector rebound. If auto sales weaken through the fall, then an important support to the manufacturing sector will wobble. Excluding transportation, new orders also fell by 0.1 percent. Shipments for durable goods slipped by 0.2 percent and this will be a small drag to Q3 GDP.
The market for new homes remains flat on its back. New home sales for August fell by 2.3 percent to a 295,000 unit annual pace. This is still in the range of a structural low for new home sales. Even in the event of another mild recession, new home sales may not fall much further. Low mortgage rates are a plus, but weak job creation is a bigger minus, reinforced by a Kafkaesque application process. Shattered consumer confidence is another minus for home sales. Consumer confidence fell precipitously in August but has since leveled out. The Conference Board’s Consumer Confidence Index ticked up slightly in September to 45.4; at least the patient has a heartbeat, but he is still on the gurney. House prices were relatively stable as of July, but may yet slip again in the face of weak demand and more foreclosures this fall. The seasonally adjusted Case-Shiller 20-City House Price Index for July was unchanged. Ten out of 20 cities showed stable or increasing prices. The Dallas Federal Reserve Bank’s Texas Manufacturing Outlook Survey showed moderately improving conditions in September after stalling in August. The Richmond Fed’s Survey of Manufacturing Activity showed contracting manufacturing activity from Maryland to South Carolina.