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Economy in Brief

Durable Goods Orders Rebound More Strongly Than Expected in October
by Sandy Batten  November 25, 2015

Durable goods orders started the third quarter strongly, jumping up 3.0%/m (0.5% y/y) in October against an expectation (Action Economics Forecast Survey) of a 1.5% m/m increase. And the 1.2% m/m decline initially reported for orders in September was revised up to a 0.8% m/m drop. A 81% m/m surge in nondefense aircraft orders more than accounted for the October increase in overall orders (this was offset slightly by a decline in motor vehicle orders). Excluding orders in the transportation sector, orders rose a more modest, but still larger-than-expected, 0.5% m/m in October (-2.4% y/y) following an upwardly revised 0.1% m/m decline in September.

Especially encouraging was the performance of core capital goods orders (capital goods orders excluding defense and aircraft) in October. They rose 1.3% m/m (0.4% y/y) with the initially reported 0.1% m/m decline in September revised up to a 0.4% m/m increase. With the September revision and October jump, core capital goods orders in October stood more than 6% at an annual rate above the 3Q average, auguring for some further improvement in business capital spending in the fourth quarter. However, the strength in orders has yet to be reflected in actual shipments of capital goods. Core capital goods shipments (a real-time proxy for capex) slipped 0.4% m/m in October (-0.5% y/y) but after an upwardly revised 0.7% m/m rise in September. So, the October level of shipments was about equal to the 3Q average. Hopefully, the rise in capital goods orders will soon translate in increased shipments.

Across the major sectors, apart from the 8.0% m/m increase in transportation orders, overall orders were also lifted by a 1.6% m/m rise in machinery orders and a 1.8% m/m increase in computer orders. Orders for electrical equipment ( 1.1% m/m) exerted the largest drag on overall orders in October.

In other parts of the report, shipments of durable goods fell 1.0% m/m (0.1% y/y) in October following a 0.2% m/m increase in September. Unfilled orders rebounded, rising 0.3% m/m (-2.0% y/y) after a 0.5% m/m fall in September. And inventories slipped 0.2% /m (0.7% y/y), the fifth monthly decline in the past six months.

The durable goods figures are available in Haver's USECON database. The Action Economics consensus forecast figure is in the AS1REPNA database.

Durable Goods NAICS Classification Oct Sep Aug Oct Y/Y 2014 2013 2012
New Orders (SA, %) 2.99 -0.82 -2.94 0.51 6.8 2.2 6.3
  Transportation 8.04 -2.24 -6.88 6.53 6.1 6.5 16.6
Total Excluding Transportation 0.53 -0.11 -0.85 -2.37 7.2 0.1 2.0
  Nondefense Capital Goods 13.23 -6.05 -4.62 3.8 6.6 2.8 10.8
    Excluding Aircraft 1.32 0.39 -1.45 0.36 6.3 -1.0 7.6
Shipments -1.02 0.24 -0.50 0.09 4.8 2.0 6.3
Inventories -0.2 -0.6 -0.2 0.7 6.1 2.4 3.8
Unfilled Orders 0.3 -0.5 -0.3 -2.1 11.4 6.4 7.5
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