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Economy in Brief

U.S. Durable Goods Rebound; Aircraft Orders Soared
by Tom Moeller November 29, 2005

Orders for nondefense aircraft soared 50.4% m/m (100.6% y/y) in October. That combined with a more than doubling (111.1% y/y) of defense aircraft bookings, caused total durable goods orders to jump 3.4% last month and therefore recovered all of the little revised 2.0% decline in September. Consensus expectations had been for a 1.5% rise in October orders.

Less the volatile transportation sector altogether, durable goods orders rose 0.3% after a 0.2% slip in September which was shallower than the decline initially reported.

Orders for nondefense capital goods recovered about two thirds of the prior month's drop with a 6.7% spike. Less aircraft these orders rose 1.3% following a 1.7% September decline that was deeper than initially estimated.

Falling orders for computers & electronic products have been a drag on the capital goods total of late. They fell 1.3% (+5.7% y/y) in October for the third hard decline in the last four months. Computer orders fell 1.7% m/m though the y/y gain of 11.0% was respectable due to a sharp 13.5% jump back in August. Orders for electrical equipment orders also have been erratic, but the trend is up. Despite a 3.5% decline in October (+12.3% y/y) the three month average level rose to its highest since early 2001. Machinery orders, in contrast, have been consistently strong. A 2.1% (8.5% y/y) rise in October pulled the three month average of machinery orders to a record high.

Shipments of durable goods rose 1.4% (6.9% y/y) in October due to broad based industry gains. Less the transportation sector, shipments rose 1.2% (7.5% y/y) with the standout being a 10.0% y/y gain in electrical equipment.

Order backlogs rose a strong 1.5% (12.0% y/y) driven partially by a 2.0% (14.4% y/y) rise in transportation. Less transportation backlogs still were firm for the third straight month, though the ratio of backlogs to shipments did slip slightly from its recent high.

Durable inventories increased 0.4% (4.6% y/y) following an upwardly revised 0.1% Rise in September. The I/S ratio for durable goods fell to its lowest since April of last year.

NAICS Classification Oct Sept Y/Y 2004 2003 2002
Durable Goods Orders 3.4% -2.0% 11.4% 9.5% 4.1% -3.4%
    Excluding Transportation 0.3% -0.2% 8.7% 11.7% 3.1% -6.2%
Nondefense Capital Goods 6.7% -8.6% 19.4% 11.0% 4.2% -9.8%
 Excluding Aircraft 1.3% -1.7% 10.7% 9.5% 4.8% -10.5%
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