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March 24, 2017 By Peter Boockvar

Core durable goods orders fall/ Tax reform

Non defense capital goods orders ex aircraft, aka core capital spending, in February fell .1%, worse than the estimate of up .5% and only partially offset by a two tenths revision up in January. The y/o/y change is essentially zero with a .2% rise. See chart below for the absolute dollar level of spending and you can see that it’s no different than where it was in 2006. With capacity utilization at just 75% vs the long term level of 80% and after many years of distorted business decisions because of artificially low interest rates this is the result.

image003(2)

 

Orders for vehicles/parts fell .8% m/o/m and is now down 3.4% y/o/y. It’s clear that peak auto sales are upon us and subprime delinquencies are rising. Orders for computers/electronics fell for a 2nd month but are up 3% y/o/y. Electrical equipment rose vs January but are down vs last year. Machinery, was flat but up y/o/y by 1.6%. Metals orders, both primary and fabricated, were higher y/o/y. Core shipments, which gets plugged into GDP, rose 1% m/o/m, above the estimate of up .2% but they are still down 1.6% y/o/y.

Bottom line, for all the optimism seen in the business confidence figures, there was little sign of that translating into an increase in capital spending in February. In my note earlier I raised the possibility of corporate decision making being on hold until companies get a sense of whether tax reform (especially on the immediate expensing issue) happens this year or next as that can of course impact the timing of spending. That seems to be the case for now and why reform must happen sooner rather than later so as not to slow growth further.

Filed Under: Latest Data

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About Peter

Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.

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Disclaimer - Peter Boockvar is an independent economist and market strategist. The Boock Report is independently produced by Peter Boockvar. Peter Boockvar is also the Chief Investment Officer of Bleakley Financial Group, LLC a Registered Investment Adviser. The Boock Report and Bleakley Financial Group, LLC are separate entities. Content contained in The Boock Report newsletters should not be construed as investment advice offered by Bleakley Financial Group, LLC or Peter Boockvar. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction or investment strategy. The views expressed in this commentary should not be taken as advice to buy, sell or hold any security. To the extent any of the content published as part of this commentary may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. No chart, graph, or other figure provided should be used to determine which securities to buy or sell. Consult your advisor about what is best for you.

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