Wednesday, November 21, 2018

Well, We Told You So!

We're generally not ones to say "we told you so", but today's worse than expected durable goods orders report is consistent with our somewhat party-pooping post back on July 27th, when that whopping 4.1% second quarter GDP number was announced.

Here's a snippet:
Our warning herein being that while such celebratory (possibly 4%+) growth, were it completely unhindered, would be difficult enough for an advanced economy to sustain over the long run, add in a global trade war and we can say with confidence that, ultimately – should the TW become a protracted affair – we’ll see the GDP number decline precipitously off of whatever Q2 delivers. It’s also fair to say that Q2’s results will reflect a pulling forward of activity, as companies rushed to get business done at the more favorable terms that existed before the unfortunate imposition of tariffs coming and going; a phenomenon that by itself sets us up for a marked letdown in future quarters."
Well, October's durable goods orders declined 4.4% and September's were revised to -0.1%, from an originally reported 0.8% increase. 

Here's from Econoday's commentary this morning:
"Orders for primary metals, down 2.3 and 1.2 percent the past two reports, continue to weaken following tariff-related pre-buying earlier in the year, while orders for machinery -- which are at the center of the capital-goods group -- fell 0.5 percent in October following lifeless gains of 0.1 and 0.2 percent in September and August."
Economists are virtually across the board lowering their next year's GDP estimates. Without exception their citing tariffs as a headwind. Of course that's a headwind that cooler heads, if they so choose, can dispense with before the expansion runs into real trouble...

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