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Last week I explored how past episodes of sharp increases in politic uncertainty, and decreases in consumer confidence, had played out in the hard data as to both production and consumption.

The upshot was that consumers tended to react first, with about a one quarter delay, and producers tended to react afterward, once the decline in demand was significant, about 2 to 3 quarters after the downturn in confidence.

One of the two measures I looked at then, manufacturers’ new orders for durable goods, was released this morning for Feburary. Let’s take a look.

Normally I don’t pay much attention to this release, because it is very noisy, and although it is touted as a leading indicator, its record is not clear to say the least. And that was the case this morning as well.

Here is the modern record of durable goods orders (blue), core capital goods orders (red) which tend to be much less noisy, and manufacturing production (gold), all normed to 100 as of just before the pandemic:
 

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While new goods orders were indeed leading in the late 1990s, that was emphatically not the case with regard to the Great Recession, where orders turned down coincident with its onset, and capital goods orders turned down four month *after* its start. Moreover, there is no evidence that they led industrial production in manufacturing, which is a classic coincident indicator. Much of this I suspect has to do with the widespread adoption of “just in time” inventory controls.

Here is the same data post-pandemic:
 

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While there is some variation among the three measures, all essentially trended sideways beginning in 2022 or 2023. Notably, both the less volatile capital goods orders and manufacturing production broke out to new highs beginning in November of last year. That is almost certainly not a coincidence. The outcome of the Presidential election may have led to a surge in euphoria. But very quickly it certainly has led to a desire to front run tariff increases. I strongly suspect it is the latter which explains the sharp increase in January which was maintained in February.

(Anecdotally, one of the large car dealers in my area, who owns about seven different franchises, has been running ads for the last few weeks encouraging potential buyers to “beat the tariffs” and “buy now!”  Which is probably an excellent if inadvertent way to convey to customers that their budgets are about to take a hit.)

The below graph shows the same post-pandemic data in YoY% form. Since new orders are up 3.4% YoY, capital goods orders up 1.4%, and manufacturing production up 0.8%, the graph is normed to 0 for each series:
 

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Now here is the same data historically up until the pandemic:
 

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The current level of YoY change would be very weak at any point before the Great Recession, but if anything above average in the 2010s expansion.

The bottom line is that, in keeping with my examination last week, there is no evidence of weakness in new orders due to increased uncertainty in the monthly data at this point.

Finally, here is this week’s update in Redbook’s YoY measure of consumer spending:
 

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The four week average is 5.8% higher YoY, which is right in line with typical readings over the last 12 months. So, also in keeping with my examination last week, consumer spending is not taking a hit yet either.

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