U.S. Durable Goods Orders Soar With Higher Aircraft Bookings; Trend Weakens

Be not misled by the headline figure. The underlying trend of durable orders has weakened substantially. The Commerce Department reported that September orders surged 3.3% following a 1.0% August decline that was slightly less than reported last month. A 2.0% orders increase was expected. On a three-month basis, orders rose at an improved 3.6% annual rate. However, volatility in aircraft once again distorted the underlying trend. Excluding the transportation sector overall, orders fell 0.8% versus a Consensus expectation for a 0.5% increase. The weakening trend is most evident in the three-month change in these orders which turned negative at a 3.9% rate.

To the upside were commercial aircraft & parts orders which more-than-doubled versus August and nearly tripled y/y. Also bucking the easing trend were September orders for computers & related products which rose 2.0% and 26.6% (AR) during the last three months. Elsewhere the trend in orders deteriorated. Though machinery orders rose 2.0% (16.3% y/y) and added to an August gain, it did not make up for a 9.8% July shortfall. Three-month growth turned sharply negative. Orders for communications equipment were notably weak and plunged 18.6% (-16.1% y/y). Electrical equipment orders ticked up 0.4% (13.7% y/y) but three-month growth was a negative 3.9%. (Earlier orders were revised up sharply.) Orders for motor vehicles slipped 0.4% (+6.1% y/y) and three-month growth also turned negative. Overall, the jump in aircraft lifted nondefense capital goods orders by 8.6% last month but excluding aircraft orders fell 0.6% and at a 5.4% annual rate since June.

Shipments of durable goods also have weakened. They fell 0.4% last month (+6.2% y/y) after a little-revised 1.4% August drop. Growth of 2.7% during the last three months was down from the recent 14-24% peaks. Excluding transportation, shipments slipped marginally last month (+10.5% y/y), but the three-month change also was a reduced 4.5%. (Again, revisions to earlier figures were positive.) Machinery shipments rose 1.5% but three-month growth of 6.4% was down from the 34.6% peak. Computer & electrical equipment shipments fell 2.3% but three-month growth held firm at 23.3%.

Weakened inventory accumulation continued behind some of the easing in orders & shipments. Durable goods inventories rose 0.5% (5.6% y/y) but that contrasted with 1.2% monthly increases this spring. The three-month growth eased to 7.1% from the 13.9% June high. Nevertheless, inventories remained roughly 10% below the late-2008 peak. Finally, backlogs of durable goods orders rose 1.0% during September and three-month growth strengthened to 4.7%.

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

Oh, the Places We'll Go: Three Scenarios for Economic Trajectory from the Federal Reserve Bank of Dallas can be found here here.