Rover's Weekly Market Brief - 03/03/2023

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Economy

New orders for manufactured durable goods decreased (-4.5%) in January to $272.3B, this is the weakest reading since April 2020 and follows a (+5.1%) increase in December, and a (-1.8%) decrease in November. Total durable goods orders are up (+3.0%) year over year. Much of the decrease in the headline number is attributable to a (-13.3%) drop in orders for transportation equipment which sank $14.2B to $92.8B. Orders for nondefense aircraft and parts fell (-54.6%). Orders for new machinery were up (+1.6%), as were computers and electronics (+0.5%). Automobile makers reported a slight (+0.2%) bump in new orders. Excluding the steep decline in orders for transportation equipment, “core” durable goods orders rose (+0.7%), the best reading since March 2022, and follows readings of (-0.4%) and (0.0%) for the previous 2 months. New orders for capital goods decreased (-12.8%) as nondefense capital goods orders dropped (-15.3%). Excluding defense, new orders decreased (-5.1%). Shipments of manufactured durable goods decreased (-0.1%) to $277.2.2B after 16 consecutive months of increases. Transportation equipment drove the decrease, down (-1.7%) to $92.2B.

The Conference Board’s Consumer Confidence Index® decreased in February to 102.9 (1985=100), down from January’s downwardly revised 106.0 reading. This marks two consecutive monthly declines. The Expectations Index, based on consumers’ short-term outlook for income and business, fell to 69.7, from 76.0 the previous month. A reading of 80 tends to signal a recession within a year. The index has been below 80 for 11 of the last 12 months. “Consumer confidence declined again in February. The decrease reflected large drops in confidence for households aged 35 to 54 and for households earning $35,000 or more,” said Ataman Ozyildirim, Senior Director, Economics at The Conference Board. Consumers’ assessment of the current business climate declined with 17.8% of respondents indicating that business conditions were “good,” down from 19.9% in January. The Present Situation Index, which is based on consumers’ sentiment toward current business conditions and the labor market, increased to 152.8 from 151.1 the previous month as 52.0% of consumers said jobs were “plentiful,” up from 48.1%. Consumers were negative about the short-term business condition, with 14.2% of people expecting them to improve, down from 18.4% in January.

The ISM® (Institute for Supply Management®) Manufacturing PMI® reported in at 47.4% for January as business activity fell 1 percentage point from the previous month, this marks the second contraction after 30 consecutive months of expansion. A value below 50% is indicative of a shrinking economy. “With Business Survey Committee panelists reporting softening new order rates over the previous nine months, the February composite index reading reflects companies continuing to slow outputs to better match demand for the first half of 2023 and prepare for growth in the second half of the year,” said Timothy Fiore, chairman of the ISM® Manufacturing Business Survey Committee. The Manufacturing PMI® figure is now at its lowest level since May 2020, when it registered 43.5%. Of the six biggest manufacturing industries, only Transportation Equipment registered growth in February. The index for new orders contracted for the fifth straight month reaching its lowest level since the pandemic, declining 2.6 percentage points to 42.5%. The Prices Index which measures what companies pay for raw materials and other supplies rose 5.1 percentage points to 44.5%. The Backlog of Orders Index rose 2.0 percentage points to 43.4% and has now contracted for four consecutive months following 27 months of expansion. The Employment Index while still in expansion territory, declined 0.2 percentage points to 50.6% after increasing for two consecutive months.

Upcoming Economic Reports:

Wednesday March 8 – Beige Book

Friday March 10 – Unemployment Rate (February)

Earnings Calendar:

 

Monday	Tuesday	Wednesday	Thursday	Friday
AeroVironment (AVAV)	Casey’s General Stores (CASY)	Brown-Forman (BF.A)	BJ’s Wholesale Club (BJ)	Westshore Terminals (WTE.TO)
Ciena (CIEN)	Squarespace (SQSP)	Campbell Soup (CPB)	Oracle (ORCL)	Buckle (BKE)