Goldman Sachs’ Jan Hatzius: Durable Goods Orders: Don’t Be Fooled by Inflation
Durable goods orders beat expectations with a 1.3% month-on-month increase in July. But the apparent strength is due to higher prices, not stronger activity. In fact, deflating orders by the producer price index for durable manufactured goods shows a 9.4% year-on-year drop in real orders, the worst since early 2002.
Even if we adjust for the unfavorable year-on-year comparisons that partly explain this plunge, the recent data look surprisingly similar to those seen in the runup to the 2001 recession.