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Good, bad news in durable goods drop

Marketplace Staff Sep 24, 2010
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Good, bad news in durable goods drop

Marketplace Staff Sep 24, 2010
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STEVE CHIOTAKIS: Right now we’re gonna ask the big question and it comes this morning as we get news about orders for big ticket items. Demand for what we know as “durable goods” was down 1.3 percent last month. Analysts expected a smaller drop. Jill Schlessinger is editor-at-large at CBS MoneyWatch. She’s with us live from New York, as she is every Friday. Good morning, Jill.

JILL SCHLESINGER: Good morning.

CHIOTAKIS: So all right, this seems worrisome to me, right? The number’s down. Anything good can come out of this perhaps?

SCHLESINGER: Absolutely. We’re going to look below the headline and the news is pretty good. When we exclude transportation orders — like big, huge planes and aircraft, which can really throw off the data — new orders gained 2 percent, that was twice as much as forecasted.

CHIOTAKIS: So all right, they were forecasting a smaller jump in everything minus transportation?

SCHLESINGER: Correct.

CHIOTAKIS: So what are we talking about when we’re talking about things minus transportation?

SCHLESINGER: So, you know, you’re talking about things that are supposed to last a few years. So we’re talking about refrigerators and computers and a lot of business spending that takes place. That really is good news. That’s a good sign of a little, healthy bump in the economy.

CHIOTAKIS: And how does this compare to past recoveries, Jill? You know, the durable goods numbers we’ve seen lately.

SCHLESINGER: Well I don’t want to bring you down, but this is not actually a great number compared to the previous two recessions and the recoveries after that. Manufacturing has certainly led the way out of this severe recession, but the pace of gain has slowed. The current recovery is far weaker than the prior two expansionary periods, which actually were pretty rotten in and of themselves. Industrial production at this point in the last couple of recoveries was up a few percent, now it’s down. And again, new orders for durable goods in the past couple of recessions — up 5 and 6 percent at this point in the recovery. And we’re down over 20 percent from our peak, so we’ve got a long way to go.

CHIOTAKIS: All right. Jill Schlesinger joining us from New York. Jill, thanks.

SCHLESINGER: Take care.

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