US Durable Goods Orders vs Inflation Pressures

May 25, 2022 09:57

The US Durable Goods Orders report for April is out today as high inflation rates and growth fears continue provoking nervous market sentiment. Durable goods orders are expected to have fallen from 1.1 percent in March to 0.6 percent in April. The consensus appears bearish for the USD and volatility may set in if there are any surprises in the actual results. 

Durable goods are products which last three years or more and have a relatively high price compared to everyday consumables. The benchmark carries insights into the health of the US manufacturing sector and industrial productivity. In the current climate of high inflation rates, it’s reasonable to expect that spending on durable goods may decline in the short-to-medium term, meaning a possible impact on overall GDP growth this quarter.  

US job market

Even if spending declines on products like heavy machinery, it’s rising on employment. The job market is a bright spot in the US economy at the time of writing. As the pandemic eases its grip on employment activity, employers are competing for workers even as the prospects of a mild recession gather steam in the long-term outlook. Next Friday’s Non-Farm Payrolls figures will reveal whether the US labour market remains resilient amid economic headwinds.  

In other news, the recent profit warning from Snapchat led it and other mega-cap technology shares down the stock market roller coaster as investors shorted the social media company. The VIX volatility benchmark rose accordingly and stock futures appear to point downwards. 

Crude oil spot prices

The bearish mood in technology stocks hasn’t carried over to the crude oil markets, which remain decidedly bullish on increased demand for travel and transportation, in addition to supply-side shortage fears amid geopolitical events in Ukraine. Natural gas prices are also relatively high for similar reasons.  

Lastly, there’s news from two major central banks today. The FOMC releases its latest minutes and Bank of Japan Governor Kuroda’s speech is scheduled later today. The USD could move if there is more hawkish rhetoric from the Federal Reserve. Bank of Japan has maintained a dovish stance, but any signals to the opposite effect may move the JPY currency crosses as inflation rises in the region, prompting the RBNZ to hike its key interest rate guidance from 1.5 percent to 2 percent. 

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks

Sarah Fenwick
Sarah Fenwick Financial Writer, Admirals London

Sarah Fenwick's background is in journalism and mass communications. She has worked as a correspondent covering Swiss Stock Exchange news and written about finance and economics for 15 years.