A bit of a mixed bag on the data front this morning as durable goods fall sharply and jobless claims also fall sharply. Durable goods orders, a notoriously volatile economic report, fell -3.3% in October. This was well shy of expectations which were for a flat report. Outside of transportation the data was still negative at -2.7%. Durable goods tend to have a very high correlation with the equity markets and could be pointing to some softness in manufacturing. It is important to note, however, that the report can be very volatile on a monthly basis.
Jobless claims fell to 407K which was well below expectations of 435K. The four week average is down 7,500 to 436K. Continuing claims are down 142K. This data can become very volatile during the holiday season so it’s possible that the large improvement is an anomaly, however, the trend is clearly in the right direction.
As both data sets have a high correlation with the equity markets it’s difficult what to make of this. The improvement in claims would appear to override the goods data as any uptick in jobs will ultimately be seen as the key factor in any sustained recovery, however, the downtick in manufacturing could be showing a reduction in spending at the corporate level. For now it looks like the markets are choosing to ignore the goods data.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.