By Richie Lin.       Photo：Chris LeBoutillier

Last week, we used PPI, CPI, PMI to predict the economic situations of USA in the following months. This week we use another indicator to explore where will the economy go in the following months. This indicator is called the yearly increased rate of Durable Goods Orders. Durable Goods Orders refer to the order status of goods that are expected to have a useful life of more than 3 years. It is a crucial data point provided by the U.S. Census Bureau in their monthly "Manufacturers' Shipments, Inventories, and Orders" report, usually around the 25th of each month. As manufacturers need orders in place before finalizing their production plans, durable goods orders serve as a leading indicator of manufacturing sector activity.

In this report, the focus is primarily on durable goods compared to non-durable goods. This is because the demand for non-durable goods, such as clothing and food, tends to be relatively unstable and unpredictable. Therefore, it is the "durable goods orders" that are closely monitored as they have a significant impact on manufacturing sector performance. Yearly increased rate of durable goods in April continued the trend of dropping from the highest point 18 to only 4.16. And if we exclude the large purchases such as airplanes or defensive contracts, the number of ordinary consumer durable goods like cars and home appliances was only 2.50. This indicates clearly that manufacturers didn’t get many new orders in April, then they don’t have to purchase and transport the materials and products in the following months. Based on durable goods orders, PMI and CPI talked in this and last week, we could predict that economy in USA will likely go into a minor recession in 2023. Companies don’t get many orders from their customers, so they will be forced to cut the expenditures, so the unemployment rate will be higher and higher because some people will be layoff to reduce the spending on human resources. Therefore, consumers will stop or restrict to buy the durable goods such furniture, electronic devices, home appliance because they need to save the money to endure the hard times. Then the vicious cycle will keep going on and on until consumers have the appetite and money to buy new things in their living rooms, garages, kitchens, etc. However, consumers will likely to as frugal as possible in the coming months under the pressures of high gasoline and high inflation. When everyone anticipates there is going to be hard times ahead, they will spend less and less money and lead to a self-fulfilling prophecy, real economic recession. However, FED might really need a minor economic recession to control tightly the inflation.

FCL market rate reference in week 26:

• Asia main ports to USAWC USD 1200~1400 per 40GP; 
• Asia main ports to USAEC and Gulf coast USD 2100~2300 per 40GP; 
• Asia main ports for IPI points of USA is USD 3300~3800 per 40GP. 
• Asia main ports to Europe base ports and West Mediterranean: USD 2000~3500 per 40GP.

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