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Economy in Brief

U.S. Durable Goods Orders Dragged Down by Defense Aircraft in November
by Sandy Batten  December 23, 2019

The advance reading for November indicated that durable goods orders fell 2.0% m/m (-3.7% y/y) following a 0.2% m/m rise in October, revised down from 0.6%. A 1.5% increase had been expected in the Action Economics Forecast Survey. The primary cause for the unexpected outsized decline was a 72.7% m/m collapse in orders for defense aircraft, which led to a 38.2% m/m drop in overall defense orders. Orders excluding defense rose 0.8% m/m in November following an unchanged reading in October. So, apart from weakness in defense, the report was not as weak as the headline decline indicated.

Orders for nondefense capital goods excluding aircraft, a key indicator of business investment plans, edged up 0.1% m/m (0.5% y/y) in November on top of a 1.1% m/m jump in October. Shipments of nondefense capital goods excluding aircraft, a good indicator of current business spending on equipment, fell 0.3% m/m after a downwardly revised 0.7% m/m gain in October. The October/November average of core capital goods shipments is about unchanged from the Q3 average, auguring about unchanged business spending on equipment in Q4 in the NIPAs, but this would be much better than the 3.8% q/q saar decline reported in Q3.

While the collapse in defense aircraft orders dragged down the overall transportation category (-5.9% m/m), orders for motor vehicles and parts actually rebounded, rising 1.9% m/m in November, reflecting the resolution of the GM strike, after having declined significantly each of the previous three months. Of the other major categories, orders for fabricated metals rose 0.4% m/m, orders for computing equipment rose 0.2% m/m, orders for electrical equipment jumped up 2.0% m/m, and other durable goods orders increased 0.2% m/m.

Durable goods shipments edged up 0.1% m/m (-2.4% y/y) in November, but this was the first monthly increase in five months. Shipments excluding defense were also up 0.1% m/m as were shipments excluding transportation. Inventories of durable goods continued to rise, up 0.4% m/m (4.7% y/y) in November, the same monthly gain as in October. Unfilled durable goods orders slipped 0.4% m/m (-1.9% y/y), due mostly to unfilled defense orders (-1.8% m/m). Unfilled orders excluding defense edged down 0.1% m/m, their ninth decline in the past ten 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 Nov Oct Sep Nov Y/Y 2018 2017 2016
New Orders (SA, % chg) -2.0 0.2 -1.5 -3.7 7.9 5.4 -1.7
  Transportation -5.9 0.1 -3.2 -10.1 9.8 3.2 -0.6
Total Excluding Transportation 0.0 0.3 -0.6 -0.3 6.9 6.5 -2.3
  Nondefense Capital Goods -1.8 2.1 -3.5 -5.5 5.5 9.1 -5.8
    Excluding Aircraft 0.1 1.1 -0.5 0.5 6.0 6.7 -4.5
Shipments 0.1 -0.1 -0.7 -2.4 7.1 4.0 -2.3
Unfilled Orders -0.4 0.0 0.0 -1.9 3.9 1.9 -1.1
Inventories 0.4 0.4 0.5 4.7 4.8 4.5 -3.0
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