While Wall Street looked upon today’s Durable Goods report with caution, noting the substantial beat in the headline print which was entirely as a result of a surge in non-defense aircraft orders (read Boeing) which soared by 65%, there was substantial weakness below the surface especially in the core CAPEX print, the capital goods orders non-defense ex-aircraft, which disappointed significantly, sliding 0.8% on expectations of a 0.3% rebound.
However, that was just part of the story. A far bigger part was missed by most because as always Wall Street was focused on the sequential change, and not on the absolute number.
As it turns out, the Department of Commerce decided to quietly revise all the core data going back all the way back to 2014. In doing so it stripped away about 4% from the nominal dollar amount in Durable Goods ex-transports, where the March print was slashed from $154.7 Billion to $148.3 Billion…
… and, worse, the government just confirmed what many had said for years, namely that CAPEX spending had been far lower than reported all along when it revised the capital goods orders non-defense ex-aircraft series lower by a whopping 6%, taking down the March print from $66.9 billion to only $62.4 billion, the lowest absolute number since early 2011.
So how did this downward revision to a critical historical series, and key driver of GDP, change the current GDP estimte? Well, according to the Atlanta Fed, “the GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 2.9 percent on May 26, up from 2.5 percent on May 17. The forecast for second-quarter real gross private domestic investment growth increased from -0.3 percent to 0.4 percent following this morning’s durable manufacturing release from the U.S. Census Bureau.“
Oddly not a word about the sharp revisions to the core data in main stream media.