Thursday, June 25, 2009

Durable Good Orders May 2009

I have just checked the web site of US Census Bureau to acquire the way they calculate the durable good orders. The formula can be found in the Q&A, as follows:

New Orders = Current Shipment + Unfilled Orders (current month) – Unfilled Orders (prior month)

The interesting thing I found is, according to the latest announcement:

Shipment (May) = 169.9billion
Unfilled orders (May) = 747.5billion
Unfilled orders (April) = 749.5billion

So by the formula:
New Orders (May) = 169.9b + 747.5b – 749.5b = 167.9b (May)

Now, for April, the figures are as follows:

Shipment (April) = 173.5b
Unfilled Orders (April) = 749.5b
Unfilled Orders (March) = 757.8b

Therefore,New Orders (April) = 173.5b + 749.5b – 757.8b = 165.2b (April)

New Orders (May) = 167.9b > New Orders (April) = 165.2b

However, the contraction on unfilled orders as well as shipment only means the situation is actually getting worse, not getting better. The consecutive contraction in shipment means the actual demand on the goods are decreasing, while the consecutive decrease on unfilled orders, if coupled with the decrease on inventory and shipment, means more inventory-clearing than "efficiency improvement". Thus, the so-called new orders increase is more an illusion.

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