Rob Carnell, Research Analyst at ING, notes that the US durable goods orders data showed a strong rebound in January, rising 4.9%mom, against expectations for a rise of only 2.9%.
Key Quotes
“And this data will buoy hopes that the slowdown in US GDP growth that culminated in a rate of only 0.7% (annualised) in 4Q15 (and will likely be revised lower on Friday), may be turning the corner.
This is choppy data at the best of times, so one month’s data has to be taken with a pinch of salt. But these figures, which provide one of the best insights into the business investment environment, are especially important right now. This is because if the US is heading into recession, as some commentators maintain, then we suspect that this decline will be led by investment, with the labour market and consumer spending following in its wake with some lag.
However, despite a decent headline figure, and bounces in some of the core indicators (we tend to focus on these core measures to shed some of the volatility of this data), the trend in orders and shipments is not giving a particularly clear message, and we will have to see more data before we can reach any firm conclusions. For example, the three month moving average for core capital goods orders fell further to -6.2%, and core capital goods shipments improved, but from -4.7% to only -4.2%, so still remain deeply depressed.
With yet another inconclusive set of data, markets will make of this whatever they want. But the fact remains, the direction of the US economy at this juncture remains far from clear. And in consequence, the Fed’s response remains in the balance, though we feel the hurdles for further tightening are high, so at the very least, this data provides no excuse for a near term tightening.”
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