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Economy in Brief

U.S. Durable Goods Orders Rise Further in October
by Sandy Batten  November 25, 2020

• Orders again surprise to upside in October with upward revision to September.

• Sixth consecutive monthly increase in orders.

• Shipments jumped; inventories rose; order backlogs eased.

Manufacturers' orders for durable goods increased 1.3% m/m (-0.3% y/y) in October on top of an upwardly revised 2.1% m/m rise in September (initially +1.9%). A 0.9% m/m gain had been expected by the Action Economics Forecast Survey. New orders have risen 43.7% since their recession low in April, but are still 2.2% below their pre-COVID February level.

Orders for nondefense capital goods excluding aircraft, a reliable leading indicator of business capital spending, also rose further, increasing 0.7% m/m (+6.2% y/y) in October with upward revisions to both September (+1.9% m/m) and August (+2.4% m/m). This was the sixth consecutive monthly increase. From their April low, nondefense capital goods orders excluding aircraft have risen 14.2% and are 4.5% above their pre-COVID January level.

Shipments of core capital goods, a reliable coincident indicator of business spending on equipment, jumped up 2.3% m/m (4.7% y/y) in October after upwardly revised gains in September and August. The October figure was the highest level of core capital goods shipments on record, dating back to 1992. The October level of core shipments was 3.3% above the Q3 average, providing a great starting point for capex in Q4.

Orders for transportation equipment rose 1.2% m/m (-8.4% y/y), down from a 3.3% m/m jump in September (revised down from +4.1% m/m). Orders for motor vehicles and parts fell 3.2% m/m, their second monthly decline in the past three months, following a 1.1% monthly gain in September. Aircraft orders jumped up 57.5% m/m, reflecting meaningful gains in both nondefense and defense orders. Computer and electronic product orders rose 3.1% m/m (9.8% y/y).

Total shipments increased 1.3% m/m (+1.1% y/y) in October following an upwardly revised 0.5% m/m gain in September. Shipments of transportation products slipped 0.2% m/m (-2.2% y/y). Shipments excluding transportation rose a solid 2.0% y/y (+2.8% y/y) after an upwardly revised 0.5% gain in September. Apart from the monthly decline in transportation shipments, all other major categories experienced increases in October.

Unfilled orders for durable goods slipped 0.3% m/m (-6.6% y/y). Excluding transportation, they rose 0.5% m/m (1.6% y/y).

Inventories of durable goods rose 0.3% m/m (0.5% y/y), the same monthly increase as in September. The September/October increases followed three consecutive monthly declines. Excluding transportation, inventories rose 0.2% (-2.7% y/y), the same rise as in September, after haven fallen for five consecutive 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 % 2019 2018 2017
New Orders (SA, % chg) 1.3 2.1 0.4 -0.3 -1.5 7.1 5.0
    Transportation 1.2 3.3 -0.9 -8.4 -4.8 9.2 4.7
  Total Excluding Transportation 1.3 1.5 1.1 4.0 0.4 5.9 5.1
    Nondefense Capital Goods Excl. Aircraft 0.7 1.9 2.4 6.2 1.7 4.6 4.1
Shipments 1.3 0.5 -0.2 1.1 0.8 6.6 2.6
    Nondefense Capital Goods Excl. Aircraft 2.3 0.7 1.6 4.7 2.4 5.7 1.1
Unfilled Orders -0.3 -0.2 -0.6 -6.6 -1.8 3.9 2.8
Inventories 0.3 0.3 -0.1 0.5 4.1 5.2 3.4
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