Durable Good Orders Fall

The Department of Commerce reported that orders for durable goods fell -1.7 percent during February, less than the Reuter's consensus estimate of an increase of 0.8 percent. January's number was revised upward to -4.7 percent from a reported -5.1 percent. Non-defense capital goods orders (excluding aircraft) declined 2.6 percent, with January's number being revised downward to -1.8 percent.

Bloomberg news quotes:

"Businesses definitely have shown they are beginning to retrench,'' said Aaron Smith, senior economist at Moody's Economy.com in West Chester, Pennsylvania, in an interview with Bloomberg Television. ``Demand is weakening and investment intentions are showing a bit of fatigue.''

"Recent information indicates that the outlook for economic activity has weakened further,'' (Fed) policy makers said in a statement after the (March 18th) meeting."

All of this seems to be additional evidence that the economy is in a slow down. Below are bullet points from the Duke University/CFO Magazine CFO Survey released March 12th, 2008.

• 54 percent of CFOs say the U.S. is now in recession, and 24 percent of the remaining CFOs say there is a high likelihood of a recession this year. CFOs do not expect the economy to recover until late 2009.

• Optimism reached its lowest point since the optimism index launched six years ago. Pessimists outnumber optimists by a nine-to-one margin, with 72 percent of CFOs more pessimistic and only 8 percent more optimistic about the U.S. economy than they were last quarter.

• Weak consumer demand and turmoil in the credit and housing markets are the top macro-concerns of CFOs. The high cost of labor ranked as the top internal concern.

• Credit conditions have directly hurt 35 percent of companies, through decreased availability of credit and higher interest rates (up 118 basis points on average). Sixty percent of firms have postponed expansion plans in response to credit market unrest.

• Capital spending is expected to increase only 3.3 percent. Price inflation is expected to rise 3 percent over the next 12 months.

Below is a chart from the CFO survey showing CFOs optimism rates for the economy and for their company. They define optimism diffusion as the measures the percentage of CFOs who have increased optimism minus the percentage who have decreased optimism (through March 2008).

Based on their 'optimism' the economy has been in the tank since the 4th quarter of 2004. Their negative outlook predates most of the economic problems that we have currently run into. Did they have some insight into upcoming events or are they just typically negative people?

Source:
"Durable Goods Orders Slip Unexpectedly , Alister Bull", Reuters News
"Orders for Durable Goods in U.S. Unexpectedly Fell", Shobhana Chandra, Bloomberg News
"Global CFO Survey:Recession In 2008, No Relief In 2009", Duke University/CFO Magazine