New orders for core capital goods rise in January, but real orders were flat.
New orders for core capital goods – nondefense capital goods excluding aircraft – increased 0.8% in January for the largest m/m increase since August. However, FTR calculates that adjusting for pricing for private capital equipment, core capital goods or-ders were flat versus December, which also is the best performance since August.
Nominal orders in January were 22.9% ahead of the pre-pandemic month of February 2020. However, real orders were up just 4.9%. Nominal core cap-ital goods orders have been consistently positive y/y since December 2020, although that comparison has fallen to just 4.3%. Real core capital goods orders, though, have been negative y/y in nine of the past 10 months and were down 3.4% y/y in January.
Total new nominal orders for durable manufactured goods fell 4.5%, seasonally adjusted, in Janu-ary for the largest drop since April 2020, but that fig-ure is just as misleading as the 5.1% jump in new orders that occurred in December. Both are distorted by swings in the aircraft sector. New orders for civilian aircraft in December were more than double those in November while orders in January fell more than 50% from December.
Excluding transportation equipment, new orders rose 0.7% – the largest increase since March, although there was some modest downward revision in the December figures. On a current-dollar basis, new orders excluding transportation equipment in January were 19.5% higher than in February 2020.
Retail inventories
Total retail inventories increased 0.3%, seasonally adjusted, on a current-dollar basis in January, according to advance figures from the Census Bureau. As has generally been the case for months, the auto-motive industry led the gains. Inventories of motor vehicles and parts rose 0.6%. Excluding automotive, retail inventories ticked up just 0.2%.
The m/m increase in inventories excluding motor vehicles and parts was the first since August, but inventories relative to sales still were leaner in January than in December due to the sharp increase in retail sales in January, according to preliminary figures released last month. Initial estimates showed retail trade sales 2.3% higher m/m in January.
On a current-dollar basis, total retail inventories in January were 14% above February 2020. Inventories excluding automotive were 28.2% higher. Adjusted for inflation, total inventories in 2022Q4 were 3% above 2019Q4 levels while inventories excluding automotive were 18.1% higher. Assuming initial figures for January hold, the total retail inventories-to-sales ratio declined to 1.24 from 1.26 in December, and the ratio excluding motor vehicles and parts fell to 1.15 from 1.17.
Mortgage rates
Mortgage rates have risen more than a half a point in the past three weeks after mostly steady declines since mid-November. The average rate on a 30-year fixed rate mortgage rose to 6.65%, which is the highest since the week ended November 10. Fred-die Mac attributed the recent rebound to stronger economic indicators and the resulting expectation for continued Federal Reserve interest rate hikes.
Higher mortgage rates come at a time when sales of existing homes were showing signs of bottoming out. Higher financing costs could undermine a recovery, though some buyers might be motivated to expedite their home buying in order to avoid potentially higher mortgage rates than current ones.
Diesel and petroleum prices
The national average price of diesel fell 8.2 cents a gallon during the week ended February 27, bringing the total decrease over the past four weeks to nearly 33 cents a gallon. Since hitting a record in June, the price of diesel has fallen nearly $1.52 a gallon. Prices were down in all regions. The largest declines were on the East Coast, especially in New England and the Lower Atlantic, each of which saw and average decrease of nearly 14 cents a gallon.
The latest week’s average diesel price of $4.294 a gallon is still 19 cents higher than a year earlier, but that comparison will look very different over the next couple of weeks. If diesel prices were to hold steady this week and next they will be nearly 56 cents be-low year-earlier prices this week and nearly 96 cents below the year-earlier average price next week.
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