The 2012 Durable Goods Benchmark Revisions
Tomorrow morning the Census Bureau will release the Advance Report on April Durable Goods, and I'll post my updates shortly thereafter. The new report will be based on the benchmark revisions published in the Census Bureau on May 18th (available here in PDF format). The revisions are substantial, as I'll illustrate below. But first, let's get a sense of the relative size of durable goods new orders as compared to GDP. Here is a chart showing how much of nominal GDP is attributable to durable goods new orders. As we can readily see, durable goods is a rather tiny part of GDP. And particularly interesting is its decline over time.
Here is a similar chart showing the relationship between durable goods and Personal Consumption Expenditures (PCE). The series is a bit noisier because it is based on monthly data rather than the quarterly data of the GDP version.
Now let's compare the pre- and post-benchmark revision data from 2000 through March 2012. I've added monthly markers to facilitate the comparison.
The table on the chart highlights the magnitude of the revision. The post-revision data gives us a deeper trough, 42% off the 2007 peak, and puts it a month earlier in March 2009. The recovery is markedly stronger in the revised series. The percentage change from the 2009 trough to the present went from a rise of 36.3% to 52%. In fact, if we compare the pre- and post-revision recoveries to their interim highs, which occurred in December 2011, the change is from a 44.6% rise to a post-revision 63%.
If we dig deeper into the data we discover that transportation orders were by far the biggest source of the revisions. Here is an overlay showing the post-revision percentage change of durable goods new orders ex transportation and the percentage change for the transportation component.
The durable goods 2012 benchmark report is a powerful reminder of that the latest economic data, especially the National Accounts and Production & Business Activity series, should be taken with a grain — make that a shaker — of salt.