September Durable Goods Orders Jump, But Core Capital Goods Still Weak
This morning, the U.S. Department of Commerce released its latest data on durable goods orders, and the report showed improvement in this vital sector of the economy. Specifically, the report said that new orders for manufactured durable goods increased $19.6 billion (or 9.9%), to $218.2 billion, in September. The advance, which comes on the heels of a 13.1% decrease in August, marked the fourth increase in the last five months and takes a bit of the sting away from the dour August-period showing. The tally was better than the market consensus expectation for last month.
More important, when broken down into components, the latest durable goods orders data were heartening. Excluding transportation, new orders increased 2.0% and when backing out defense orders, new orders advanced a healthy 9.1%. In addition to the manufactured durable goods orders, the latest Commerce Department report contained some other noteworthy figures. Indeed, the inventories of manufactured durable goods for September increased by $0.9 billion (or 0.3%), to $372.9 billion. The September figure marked the 32nd advance in the last 33 months. Meanwhile, new capital goods orders, which exclude defense orders, increased by $13.7 billion (or 23.7%), to $71.4 billion.
However, orders for core capital goods, which are considered a meaningful gauge for business investment, were unchanged in September after a slight August gain. The lackluster result in this key category, which showed weakness for a fourth consecutive month, is a sign that companies remain uncertain about the future, and there still is a lot of work that needs to be done on the domestic economic front.
Our sense is that the latest figures on manufactured durable goods orders are another small sign that the U.S. economy is showing improvement, even if at a very pedestrian pace at this point in the economic upturn. This semi-encouraging report on the manufacturing sector comes on the heels of yesterday’s encouraging report on new home sales for the month of September. And, at the same time the report on durable goods orders was released, we learned that weekly initial jobless claims fell in the latest five-day stretch. All in all, the U.S. economic data of late has shown improvement, which is a good sign heading into the all-important holiday shopping season.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.