Monday, August 3, 2009

News That Doesn't Depress: Durable Goods Up, Consumer Spending Up

U.S. durable goods orders, excluding transportation, increased unexpectedly in May by 1.1%. In addition, consumer spending rose 0.3% in May.

Durable goods orders had been forecast by the Commerce Department to decline 0.4%. A Reuters survey of analysts projected a 0.6% decline. The 1.1% increase was a surprise. It follows revised data for April, where durable goods jumped 1.8%.

Moreover, machinery orders increased 7.7%, an indication that businesses are investing in factories. Non-defense capital goods orders, excluding aircraft, is considered to be a proxy for business spending. It rose 4.8% in May, after being forecast to fall 0.6%. We have to go back to September, 2004 to find a similar increase.

The government stimulus is finally starting to affect the economy as "social benefit payments" led to a 1.4% rise in personal incomes in May. After tax income rose 1.6% and disposable income increased 0.2%.

Spending only rose 0.3%, suggesting that consumers increased savings, and they did. The savings rate rose to 6.9%, the highest level in more than 15 years. Apparently, consumers are showing greater individual fiscal responsibility than the government.

Not all is good news. While existing home sales have increased, new single family home sales continued to slide, dropping 0.6% in May. However, signs do suggest the fall in home construction may be about turn. Median prices increased 4.2%, from $212,600 to $221,600. Demand for home loans increased.

So what does all of this mean? While no one's doing cartwheels over the data, it's stronger than expected. It does suggest we're at the bottom of the recession and things will start to slowly pick up.

For business owners, this is the time to aggressively grab market share. Your competitors will likely remain timid, resulting in less competition for your marketing and advertising messages. As the spending picks up, you'll get more than your current share.

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