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24 Mar 2016
US: Durable goods orders report highlights risks to Q1 GDP growth - Wells Fargo
According to analysts from Wells Fargo, today’s report on durable goods orders will be a drag on first-quarter GDP growth.
Key Quotes:
“Our below-consensus call for Q1 GDP is based in part on tepid equipment spending and an inventory drag. Today’s durable goods report is on track to with that, showing a drop in shipments and inventory drawdown.”
“The retreat in orders was broadly based, with declines in just about every category.”
“When the three-month annualized rate of decline starts falling on a double-digit percentage basis, it is often an indication of recession. To be clear, we do not think the U.S. economy is headed for imminent recession, but the manufacturing sector is a clear vulnerability.”
“Headline GDP growth figures will not be getting much help from business spending in the near future. Speaking of headline GDP growth, today’s durable goods report also shows that inventories fell again in February. The 0.3 percent decline suggests a slower pace of inventory investment will be a drag on first quarter GDP growth. That fits with our forecast, which shows inventories subtracting 0.4 percent from headline GDP growth in the first quarter. This latest read suggests that drag might be even larger.”
Key Quotes:
“Our below-consensus call for Q1 GDP is based in part on tepid equipment spending and an inventory drag. Today’s durable goods report is on track to with that, showing a drop in shipments and inventory drawdown.”
“The retreat in orders was broadly based, with declines in just about every category.”
“When the three-month annualized rate of decline starts falling on a double-digit percentage basis, it is often an indication of recession. To be clear, we do not think the U.S. economy is headed for imminent recession, but the manufacturing sector is a clear vulnerability.”
“Headline GDP growth figures will not be getting much help from business spending in the near future. Speaking of headline GDP growth, today’s durable goods report also shows that inventories fell again in February. The 0.3 percent decline suggests a slower pace of inventory investment will be a drag on first quarter GDP growth. That fits with our forecast, which shows inventories subtracting 0.4 percent from headline GDP growth in the first quarter. This latest read suggests that drag might be even larger.”