1. Durable Goods Orders (Indicator of Future Manufacturing Activity) Web: www.census.gov/indicator/www/m3/adv/ Major revisions covering prior 2 months. Durable goods are products with a 3-year life expectancy Includes high-priced discretionary consumer products. Advance Durable Goods Report surveys 3,500 manufacturers representing 89 industry categories. Data is collected on New Orders, Shipments, Unfilled Orders, Inventories. Numbers reported are nominal dollars, seasonally adjusted but not annualized Real growth rate = Durable order growth rate – producer price index growth rate. Strip out defense goods – (tanks, guns, ammo, aircraft, ships, missiles, computers) - and aircraft to get an accurate reading of business sector demand. Capital goods orders – equipment, machines, robotics etc. purchased by firms and used to make other products. Non-defense capital goods (Core capital goods orders) – best leading indicator of business investment spending. Shipments – ordered products that are being delivered. Coincident economic indicator – measure of current economic activity. Shipments = production –  inventory Unfilled orders – indicator of manufacturing resources strain. Production Process bottlenecks:  unfilled orders =>  investments =>  plant capacity =>  industrial infrastructure =>  workers/  wages =>   Y/Y =>   P/P  Unfilled Orders = New Orders – Shipments  unfilled orders (strong production and/or decline new orders) =>  future factory/employee activity =>  (  Y/Y) t+1 Leading indicator:  new orders for 3-4 months =>(3-6 months)  future factory/employee activity =>  (  Y/Y) t+1 Inventories: Important with John Maynard Keynes Aggregate Expenditure Model If production > new orders, then either  unfilled orders or  unplanned inventories =>  future production/output =>  (  Y/Y) t+1 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Market Analysis: Bonds:  new orders (excluding defense & aircraft) =>  manufacturing sector =>   Y/Y =>   P/P =>  D Bonds =>  i Bonds Stocks:  new orders =>  profits =>  P Stocks Dollar:  new orders =>  manufacturing sector =>   Y/Y =>   P/P =>  D Bonds =>  i Bonds =>  dollar New Orders Unfilled Orders Shipments = Production –  Inventory