Message from Durables Report: Play Defense

The market being in a celebratory mood, little attention is being paid to such gloomy news as the durable goods report, which Briefing.com describes in rather bleak terms:

August durable goods new orders dropped a disappointing 0.5%.  There was nothing in the breakdown of the data to provide contrary cheer. Every key category was soft.

So, in an attempt to find the silver lining and push the market over the critical hump so we can enjoy the champagne we have had on ice since January, 2000, here are the durable goods categories that showed better growth in both shipments and new orders in August (all data sourced from US Department of Commerce, on a non-seasonally adjusted year/year basis.)

The clear winner in today’s report was Defense Capital Goods, which saw nearly a 70% rise in new orders and a 10% rise in shipments. And while the trend does nothing to help our general sense of well-being, with inventory and backlog flat and a customer with good credit quality the defense sector appears to be a good play in this environment.

DefenseCapitalGoods.jpg

The runner-up for our affections is Communications Equipment, not traditionally a defensive play but perhaps so today due to how low the sector sunk and the high credit quality of its remaining customers. Those who deride Verizon’s capital spending may not appreciate that the company is one of the last threads on which the economy hangs. At any rate, their spending appears to be lending a helping hand to the environment for comm equipment manufacturers.

CommunicationsEquipment.jpg

In the “ehh, I guess we’ll take it” department is Transportation Equipment. New orders improved and turned positive, while shipments did just a bit better. Still, the inventory growth suggests that the industry is making too much stuff and will have to cut prices, production or both in the near future.

Transportation.jpg

Finally, last but (unfortunately) not least comes Motor Vehicles and Parts.  Orders and shipments for beleaguered Detroit were both down year/year. However, they were down less than they were in July. With inventory building up further the industry may still be going to hell in a handbasket, but it will take longer to get there. That’s positive, isn’t it?
motorvehicle.jpg

We now return to our previously scheduled celebration.

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Topics: AH, Alcatel-Lucent (ALU), Autos, Capital Goods, Ceradyne (CRDN), Communications Equipment, Communications Services, Consumer Cyclical, Corning (GLW), Daimler Chrysler (DCX), Economy, Embraer (ERJ), Ford Motor (F), General Motors (GM), L-3 Communications (LLL), Motorola (MOT), Nokia (NOK), Palm (PALM), Qualcomm (QCOM), Research in Motion (RIMM), Stock Market, Technology, Transportation, UT Starcomm (UTSI) | RSS

One Comment on “Message from Durables Report: Play Defense”

  1. [...] Our analysis has provided a useful advance read, making us more cautious when all appeared well. So what does it tell us now? [...]

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