Matt Cardy/Getty Images
The March Durable Goods Orders Report
shows that manufacturers are losing confidence in the economy. The Census Bureau
reported that business orders for machinery, computer equipment, and the like decreased 2.1% in March when compared year-over-year
. This is down from the 3.2% growth reported in February, and is the type of the decline one would expect if the economy were headed for recession. Durable Goods Orders have remained in the positive since last September, when orders were down 6%. (Source: Census Bureau, Report on Manufacturer's Orders
, Advance Report, Table 1, seasonally adjusted figures)
By the way, most articles you read compare this month to last month, which showed a .3% decline since February. However, year-over-year comparisons do a better job of predicting the GDP report, which is also year-over-year. (See Durable Goods Spreadsheet in Google docs)
Why are durable goods orders so important? Since they represent the orders for big ticket items, businesses will hold off making the purchases until they are confident in the economy. Therefore, decreasing orders mean decreasing production. And that is not good for GDP growth. That's why the Durable Goods Order report is generally considered one of the more important leading economic indicators.
What This Means for You
The current Subprime Mortgage Crisis
has created a general lack of confidence in the economy. Many analysts are concerned about a possible recession
in 2008. When the economy is at an inflection point, as it is now, it is important to watch the important economic indicators
to get a sense of the trend. Two important reports will be released this week: the Q1 GDP report, to be released Wedndesday, April 30, and the Employment Report
, to be released Friday, May 2.