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Economy in Brief

U.S. Durable Goods Orders Decline Unexpectedly During August But Short-Term Trend Firms
by Tom Moeller September 25, 2009

Durable goods orders declined unexpectedly last month and reversed half of the little-revised 4.8% jump during July. Virtually all of the August decline reflected lower orders for transportation equipment which gave back half of a strong gain during the month earlier. Excluding transportation equipment durable goods orders slipped 0.0% after a 0.9% July increase.

Despite the recent monthly volatility, a picture of moderate recovery has emerged from the factory sector. Overall durable goods orders have risen 3.3% since their January low. Moreover, orders excluding transportation equipment since their April low are up 4.4%. These increases have given rise to two months of firm gains in factory sector industrial output of 1.4% and 0.6%.

Lower bookings for transportation equipment reversed half of a July increase with a 9.3% decline. A 29.9% (-21.4% y/y) drop in aircraft orders was to blame. Orders for motor vehicles & parts ticked up 0.4% (-23.3% y/y).

Only modest easing of orders in other industry groups was evident in last month's figures. New orders for computers and electronic products slipped 0.7% (-8.1% y/y) after three consecutive months of strong increase. Computer orders fell significantly for the second straight month (-9.6% y/y) but communications equipment orders increased for the second month (-11.8% y/y). Among other sectors machinery orders ticked up 0.7% (-29.3% y/y) after a hard 7.9% July decline while electrical equipment & appliance orders slipped 0.5% (-18.7% y/y) after a firm July gain. Primary metals posted a firm increase for the third consecutive month but remained off by one-third from the year ago level and fabricated metal products increased for the third straight month (-15.2% y/y).

New orders for nondefense capital goods fell a hard 7.1% and reversed all of their July increase as aircraft orders fell. Other capital goods orders slipped just 0.4% but they have risen by 6.5% since their April low.

Whatever firming there has been in durable goods orders has yet to show up much in shipments. They fell 1.4% last month (-17.8% y/y) after a 2.2% July increase and they were up just 1.6% from the May low. Computers & electronic products have led the shipments rise with a 5.5% three-month increase but machinery & electrical equipment shipments continued lower. Inventories of durable goods continued lower last month and posted a 1.3% decline which was their eighth consecutive down month (-8.9% y/y). Unfilled orders also continued lower (-10.8% y/y) as they have since last September.

The durable goods figures are available in Haver's USECON database.

Today's remarks by Fed Chairman Ben S. Bernanke can be found here.

NAICS Classification (%) August July June Y/Y 2008 2007 2006
Durable Goods Orders -2.4 4.8 -1.1 -20.2 -5.8 1.4 6.2
    Excluding Transportation -0.0 0.9 2.6 -18.9 -1.2 -0.3 9.1
Nondefense Capital Goods -7.1 7.0 -0.2 -23.2 -6.8 3.5 9.4
 Excluding Aircraft -0.4 -1.3 3.8 -20.7 -0.3 -2.7 10.7
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