Wednesday :: Nov 24, 2004

As Non-Defense Durable Goods Orders And The Dollar Fall Further, The Chinese Give Advice


by Steve

As the dollar continues to fall against other currencies with overseas central banks dumping our currency for Euros, durable goods orders in October fell an unexpected .4% rather than an expected .5% increase. It would have been worse had it not been for Pentagon spending.

The Commerce Department said orders for durable goods -- big-ticket items meant to last at least three years -- were propped up by strong military demand. In contrast, orders for computers, cars and civilian planes all slumped.

Non-defense durable goods orders dropped 1.5 percent, the sixth decline in the last seven months, and orders excluding transportation fell 0.7 percent, the department said.

Strong demand for military aircraft gave the October figures a stronger appearance then they would have had otherwise.

Orders for military aircraft soared 35.2 percent last month, but civilian aircraft orders slid 0.4 percent.

Motor vehicle demand fell a sharp 2.8 percent and orders for computers and related products dropped 10.3 percent. The weakness in computer orders led to a 5.7 percent drop in the larger computers and electronic products category, the biggest monthly decline since November 2003.

Before the report, analysts said a weakening dollar, which makes U.S.-made goods less expensive overseas, would likely be a factor supporting orders growth.

However, the October report, which offers a key reading on the health of the manufacturing sector, suggested some weakness in business capital spending plans. Civilian capital goods orders, excluding aircraft, fell 3.6 percent last month, reversing much of September's 5.2 percent rise.

Sure, our GOP friends will say “big deal” because the jobless claims figures appear to be improving, at least for now. But again, where are those jobs being created, and how good is it that three years into a recovery durable goods orders are being propped up only by the Pentagon?

The Administration’s economic policy centers on crashing the dollar in a futile effort to make our goods more affordable, which will only force overseas investors already concerned about our rising deficits to dump dollar-denominated investments to get better returns elsewhere. Now the Chinese of all people are now telling us to stop blaming them and others for our own trading problems, and are suggesting that we give up competing with them and other low cost countries in textiles, shoes, and agriculture so that we can focus on industries where we have advantages, can increase our employment, and can sell trading partners high-cost things to even out the imbalances.

We’ve fallen a long way down when we have to get somewhat sound economic advice from the Chinese, in which they are suggesting in reality an industrial policy. But at least the Chinese are suggesting some strategic thinking for our economy that focuses on high paying domestic jobs and market share, rather than the "let Corporate America drive our policy" aproach of this Administration (except when they can buy votes like the steel subsidies and the Farm Bill). Some may deride any suggestion of an industrial policy, yet what the Chinese are talking about has more substance than what passes for economic policy from the Bush Administration.

Steve :: 10:04 AM :: Comments (20) :: Digg It!