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Economy in Brief

Air Came Out of U.S. Durable Orders, Tech Off As Well
by Tom Moeller November 28, 2006

An 8.3% decline in new orders for durable goods last month more than reversed an upwardly revised 8.7% surge during September. The volatility largely reflected first the near-tripling of civilian aircraft & parts orders during September then a 37.4% decline last month. Consensus expectations had been for a 5.0% in total orders during October.

Additional weakness last month was provided by a 10.2% (+3.3% y/y) decline in orders for computers & electronic products that very much reflected a 25.6% (-24.6% y/y) drop in computers.

During the last ten years there has been a 69% correlation between the y/y change in durable goods orders and the change in output of durable goods..

Orders for nondefense capital goods dropped 15.6% and less aircraft they were off 5.1%. Offsetting the slide in computer orders was a 1.4% (13.4% y/y) increase in new orders for machinery and a 5.1% (8.4% y/y) rise in electrical equipment & appliances. During the last ten years there has been an 86% correlation between the y/y change in capital goods orders less aircraft and the y/y change in business fixed investment in equipment & software from the GDP accounts.

Orders for motor vehicles & parts rose 1.4% (-9.5% y/y) while primary metals orders increased 1.1% (7.4% y/y).

Durable goods orders less transportation fell 1.7% after an upwardly revised 0.5% October increase. Consensus expectations had been for a 0.1% rise in total orders less transportation.

Shipments of durable goods increased a slight 0.6% (3.3% y/y) after a little revised 2.7% October tumble. Less the transportation sector shipments rose a similar 0.5% (5.8% y/y) after a 2.2% slide the prior month. During the last ten years there has been an 82% correlation between the y/y change in durable goods shipments and the change in industrial production of durable goods.

Order backlogs rose another 1.2% (21.8% y/y) and less transportation rose 0.9% (13.2% y/y). Unfilled orders for nondefense aircraft & parts surged by 2.4% (53.9% y/y).

Durable inventories rose 0.8% (8.2% y/y). Less the transportation sector inventories rose 0.6% (9.1% y/y) and the inventory to shipments ratio outside of transportation added to its September surge.

NAICS Classification October September Y/Y 2005 2004 2003
Durable Goods Orders -8.3% 8.7% 2.3% 9.0% 6.4% -0.6%
    Excluding Transportation -1.7% 0.5% 4.9% 9.4% 7.6% -1.7%
Nondefense Capital Goods -15.6% 24.7% 8.5% 21.4% 5.6% -3.4%
 Excluding Aircraft -5.1% 3.2% 6.2% 12.3% 2.8% -2.0%
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