On Friday I noted that real personal spending on goods, especially durable goods, had declined in September. If we have reached a tipping point on that metric, a recession in the near future looks much more likely, even as spending on services continues.

Late last week we also got further evidence of the bifurcation between the consumer economy and the AI-fueled production economy, in the form of durable goods orders and motor vehicle sales.

Let’s look at motor vehicle sales, updated right through November first. On a month over month basis, both light vehicle (sedans, SUVs, pickup trucks) increased, as did sales of heavy weight trucks:

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That’s the good news.

The bad news is when we put this improvement in perspective by looking at the long term historical data:

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Heavy truck sales carry much more, and more reliable, signal than light vehicle sales, and they always turn down sharply first. Which is exactly what they have done in the past few months. The long leading signal of housing construction turned recessionary many months ago, and now the next shoe has clearly dropped.

But the other news last week, on manufacturers’ new durable and capital goods orders, told a completely different story, as both increased to among their best readings since the pandemic:

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In the case of core capital goods orders, it was the best reading since the pandemic except for one month. This is a strong uptrend that began over a year ago and really accelerated this year.

But the intersection between these two metrics is production of, and spending on, consumer durable goods. Here is headline durable goods orders (blue) vs. consumer durable goods orders (red), updated through September:

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As per the above, the former was in a strong uptrend. But the latter remained flat, just as it has been for two years.

So let’s compare consumer spending on durables YoY (blue) vs. manufacturers orders for consumer durables YoY (red):

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Since the latter are much noisier and more volatile than the former, I have supplied the quarterly average as well as the monthly YoY change, divided by 1.5 for scale.

In general, consumer spending on durables turns first, giving manufacturers their cue to produce more or less. This was complicated by the “China shock” beginning in 1999, where goods imports from China increased sharply, and for a generation.

Finally, here is the post-pandemic look:

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Consumer spending on durables increased last autumn and winter, particularly in anticipation of T—-p’s tariffs. The YoY comparisons are still positive, but less so. As per usual, the producer response occurred afterward. 

It is especially important to reiterate than the most recent durable goods and spending data has only been released through September. The motor vehicle data, as well as other types of data such as tax withholding, have indicated a sharp slowdown since. But we’ll have to wait at least one more month to see if that has truly broadened into a contraction in consumer spending on goods.

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