US data paint a nasty picture, but there's more to it than meets the eye

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Economic data from the US look nasty this morning, though the bark may be worse than the bite. Gross domestic product for the second quarter was revised down to 1.3% from previous estimates of 1.7%. Adding insult to injury, new orders for US durable goods fell a full 13.2% in August—the worst decline since January 2009, at the pinnacle of the recession.

There’s more here than meets the eye, however, particularly in durable goods. The most significant declines in new orders came from capital goods (-26.2%), which the Census Bureau breaks down into defense capital goods (-40.1%) and non-defense capital goods (-24.3%). The US is reducing its defense expenditures as operations in Afghanistan draw to a close, so the first number shouldn’t be too surprising.

The non-defense number is strongly affected by aircraft production, but that business is dominated by a handful of large companies and may be more indicative of a bad quarter than a serious, negative trend. Without aircraft, in fact, non-defense capital goods—widely viewed as a barometer of business spending—actually increased by 1.1 percent, after a 5.2% decline in July.

On a positive note, initial jobless claims fell to 359,000 for last week, down 26,000 from the week before, to the indicator’s lowest level in two months.

Overall, the negative GDP revision didn’t look so pretty, but the economic data out today might have been more of a mixed bag than the numbers immediately indicated.