DAILY ECONOMIC DATA

Durable Goods Orders decline 1.7% in September T

New orders for durable goods declined 1.7% in September versus a consensus expected rise of 1.5%. Excluding transportation, orders increased 0.3% versus a consensus expected increase of 0.7%.

The decline in orders in September (-$3.8 billion) was mostly due to defense aircraft and parts (-$2.1 billion) and motor vehicles and parts (-$1.1 billion). Other weak sectors included fabricated metals (-$0.8 billion) and computers/electronics (-$0.4 billion). Strong sectors included non-defense aircraft (+$2.4 billion), machinery (+$1.2 billion), and primary metals (+$0.3 billion).

When calculating business investment for the GDP accounts, the government uses non-defense capital goods shipments excluding aircraft. That measure rose 1.0% in September and was revised up to show a 1.8% gain in August versus a previously estimated 1.0% increase.

Unfilled orders rose 1.1% in September and are up 18.0% versus a year ago.

Implications: While new orders for durable goods are down at a 5.5% annual rate in the past three months, the weakness is all due to transportation. In August, civilian aircraft orders fell 40.9%; in September, military aircraft orders fell 37.3%. Meanwhile, the strike-affected auto sector had orders down 10.9% in the last two months. Excluding the volatile transportation sector, orders are up at a 6.9% annual rate in the past three months. The most important part of today’s report on business investment showed non-defense capital goods shipments excluding aircraft increased 1% in September on top of an upwardly revised 1.8% in August. This brings the two-month growth of these “core” shipments to the fastest rate in two years. These figures, plus positive data on durable inventories, make us more confident in our long-held but lonely and bullish estimate that the U.S. economy grew at a 4% annual rate in Q3 (to be reported October 31). In other news today, new claims for unemployment insurance declined 8,000 to 331,000 last week, remaining in a range that suggests job growth continues.