| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| New Orders - M/M | -0.5% | -5.0% to 1.0% | -0.8% | 0.0% | -0.8% |
| Ex-Transportation - M/M | -0.1% | -0.9% to 0.2% | 0.4% | 0.5% | 0.6% |
| Core Capital Goods - M/M | 0.5% | 0.2% | 0.3% |
Highlights
New orders for durable goods in September are down 0.8 percent from August, and August is revised down to a decrease also of 0.8 percent from July. The September change is below the consensus of down 0.5 percent in the Econoday survey of forecasters. Much of the softness in the headline is due to the components for aircraft and parts.
Orders for transportation are down 3.1 percent in September. Excluding transportation orders for durable goods are up 0.4 percent for the month. The transportation component is pulled down by a drops of 22.7 percent and 23.7 percent in nondefense and defense aircraft, respectively. Boeing orders are up in September to 65 units after 22 in August. However, these orders do not appear to have been booked quite yet, perhaps affected by the ongoing strike at the aircraft manufacturer. On the other hand, orders for motor vehicles and pars are up 1.1 percent and likely to rise in coming months as consumers and businesses replace vehicles lost to hurricane damage.
Orders are mixed in other components, but mostly to the upside. Primary metals orders are up 0.5 percent in September and fabricated metal products up 2.1 percent. Machinery orders are down 0.2 percent for the month. On the other hand, orders for computers are up 0.9 percent and communications equipment up 0.3 percent.
Core capital goods orders nondefense capital goods excluding aircraft are up 0.5 percent in September from August and up 0.3 percent in August from July. The underlying trend for new durables orders has a little upward momentum that could get a boost from hurricane recovery needs in the coming months.
Shipments of durables are down 0.6 percent for September and also for August. This is also related to weakness in aircraft where the Boeing strike means fewer units are being completed and sent to customers. Excluding transportation, shipments are up 0.3 percent in September and up 0.2 percent in August.
Unfilled orders for durable goods are up 0.2 percent in September and up 0.2 percent in August. Manufacturers of durables have some orders in the pipeline to support future activity. Inventories of durable goods are down 0.2 percent in September after no change in August. Although conditions in the factory sector have been soft for some while, unwanted inventories are not accumulating.
Orders for transportation are down 3.1 percent in September. Excluding transportation orders for durable goods are up 0.4 percent for the month. The transportation component is pulled down by a drops of 22.7 percent and 23.7 percent in nondefense and defense aircraft, respectively. Boeing orders are up in September to 65 units after 22 in August. However, these orders do not appear to have been booked quite yet, perhaps affected by the ongoing strike at the aircraft manufacturer. On the other hand, orders for motor vehicles and pars are up 1.1 percent and likely to rise in coming months as consumers and businesses replace vehicles lost to hurricane damage.
Orders are mixed in other components, but mostly to the upside. Primary metals orders are up 0.5 percent in September and fabricated metal products up 2.1 percent. Machinery orders are down 0.2 percent for the month. On the other hand, orders for computers are up 0.9 percent and communications equipment up 0.3 percent.
Core capital goods orders nondefense capital goods excluding aircraft are up 0.5 percent in September from August and up 0.3 percent in August from July. The underlying trend for new durables orders has a little upward momentum that could get a boost from hurricane recovery needs in the coming months.
Shipments of durables are down 0.6 percent for September and also for August. This is also related to weakness in aircraft where the Boeing strike means fewer units are being completed and sent to customers. Excluding transportation, shipments are up 0.3 percent in September and up 0.2 percent in August.
Unfilled orders for durable goods are up 0.2 percent in September and up 0.2 percent in August. Manufacturers of durables have some orders in the pipeline to support future activity. Inventories of durable goods are down 0.2 percent in September after no change in August. Although conditions in the factory sector have been soft for some while, unwanted inventories are not accumulating.
Market Consensus Before Announcement
New orders for durable goods are expected to fall 0.5 percent month over month for September after showing no change in August. Excluding transportation, new orders are expected to fall 0.1 percent following August's 0.5 percent increase.
Definition
Durable goods orders are new orders placed with domestic manufacturers for factory hard goods. The report also contains information on shipments, unfilled orders and inventories. The advance release provides early estimates and is revised about a week later by the factory orders report.
Description
Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. Rising equity prices thrive on growing corporate profits - which in turn stem from healthy economic growth. Healthy economic growth is not necessarily a negative for the bond market, but bond investors are highly sensitive to inflationary pressures. When the economy is growing too quickly and cannot meet demand, it can pave the road for inflation. By tracking economic data such durable goods orders, investors will know what the economic backdrop is for these markets and their portfolios.
Orders for durable goods show how busy factories will be in the months to come, as manufacturers work to fill those orders. The data not only provide insight to demand for items such as refrigerators and cars, but also business investment such as industrial machinery, electrical machinery and computers. If companies commit to spending more on equipment and other capital, they are obviously experiencing sustainable growth in their business. Increased expenditures on investment goods set the stage for greater productive capacity in the country and reduce the prospects for inflation.
Durable goods orders tell investors what to expect from the manufacturing sector, a major component of the economy, and therefore a major influence on their investments.
Importance
Durable goods orders are a leading indicator of industrial production and capital spending.
Interpretation
The bond market will rally (fall) when durable goods orders are weak (strong). A moderately healthy report for new orders bodes well for corporate profits and the stock market, however. Durable goods orders are one of the most volatile economic indicators reported in the month and this series can be revised by significant amounts from one month to the next. More than any other indicator, it is imperative to follow either three-month moving averages of the monthly levels or year-over-year percent changes. These adjustments smooth out the monthly variability and provide a clearer picture of the trend in the manufacturing sector.
Whenever economic indicators are particularly volatile, it becomes customary to exclude the more variable components from the total. For instance, market players exclude defense orders and transportation orders from durable goods because these fluctuate more than the overall total. Incidentally, aircraft orders are the guilty culprit, which are included in both of these categories. Airplanes are ordered in quantity, not one at a time. Analysts exclude the categories containing aircraft orders because they obscure the underlying trend, not because the aircraft industry is unimportant.
Economists closely watch nondefense capital goods orders as a leading indicator of capital spending. Typically, traders follow the special series for nondefense capital goods excluding aircraft because it shows the underlying trend for equipment investment after discounting sharp swings from aircraft orders.
Durable goods orders are measured in nominal dollars. Economic performance depends on real, rather than nominal growth rates. One can compare the trend growth rate in durable goods orders with that of the PPI for finished goods to assess the growth rate in real orders.
Orders for durable goods show how busy factories will be in the months to come, as manufacturers work to fill those orders. The data not only provide insight to demand for items such as refrigerators and cars, but also business investment such as industrial machinery, electrical machinery and computers. If companies commit to spending more on equipment and other capital, they are obviously experiencing sustainable growth in their business. Increased expenditures on investment goods set the stage for greater productive capacity in the country and reduce the prospects for inflation.
Durable goods orders tell investors what to expect from the manufacturing sector, a major component of the economy, and therefore a major influence on their investments.
Importance
Durable goods orders are a leading indicator of industrial production and capital spending.
Interpretation
The bond market will rally (fall) when durable goods orders are weak (strong). A moderately healthy report for new orders bodes well for corporate profits and the stock market, however. Durable goods orders are one of the most volatile economic indicators reported in the month and this series can be revised by significant amounts from one month to the next. More than any other indicator, it is imperative to follow either three-month moving averages of the monthly levels or year-over-year percent changes. These adjustments smooth out the monthly variability and provide a clearer picture of the trend in the manufacturing sector.
Whenever economic indicators are particularly volatile, it becomes customary to exclude the more variable components from the total. For instance, market players exclude defense orders and transportation orders from durable goods because these fluctuate more than the overall total. Incidentally, aircraft orders are the guilty culprit, which are included in both of these categories. Airplanes are ordered in quantity, not one at a time. Analysts exclude the categories containing aircraft orders because they obscure the underlying trend, not because the aircraft industry is unimportant.
Economists closely watch nondefense capital goods orders as a leading indicator of capital spending. Typically, traders follow the special series for nondefense capital goods excluding aircraft because it shows the underlying trend for equipment investment after discounting sharp swings from aircraft orders.
Durable goods orders are measured in nominal dollars. Economic performance depends on real, rather than nominal growth rates. One can compare the trend growth rate in durable goods orders with that of the PPI for finished goods to assess the growth rate in real orders.
