Overnight Henry’s Raff Report has looked in some detail at the US economic gloom scenario and finds things are not as bad as many pundits seem to believe. While there is currently concern at the state of US housing in particular, all is not lost.

One of the largest investment banks in the US has warned that it is all over and that the US economy is set for a hard landing, largely because of the turndown in US housing and impact of high fuel prices.

So now is probably a good time to once again consider trends in orders for durable goods. These orders will become part of industrial production in six to nine months time. New orders have decelerated, but orders are still rising on a year ago — there are no definitive signs of an imminent collapse.

Recent data referred to in another Raff Report showed that the US economy was operating at or close to capacity and that new investment was needed to increase output. US industry investment in new capital is as strong as a bull’s roar. New orders for industrial machinery are very strong with June orders up 19% on a year ago and for the July quarter; orders for machinery were up 16% on a year ago.

In terms of the changes in orders for the June quarter on a year ago, other than metals, only electrical equipment recorded a very strong 22% increase. Two other sectors that recorded solid increases were defence capital goods and construction machinery, with increases of 16% and 12% respectively.

The transportation sector is currently one area of weakness with orders for the July quarter down 5.2% on a year ago. Orders for motor vehicles and parts fell 0.8%, and orders for non-defence aircraft and parts that are notoriously volatile, fell 20.3%. Orders excluding transportation were 11.9% higher for the July quarter on a year ago.

In terms of the July quarter on a year ago, durable goods orders, excluding transportation, rose 12%, a higher pace of change than the June quarter showing a rise of 10% over the previous year — excluding transport. And new orders for durable goods orders have accelerated. The US is not all gloom and doom for metal demand.

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