Durable Goods Orders Dip in October

By November 24, 2010Economy

Today’s Commerce Department report on durable manufactured goods provides more evidence that the manufacturing recovery is continuing to slow as new orders fell by 3.3 percent in October, the largest single monthly decline in nearly two years. Stripping out the volatile transportation sector, new orders still fell by a sizable 2.7 percent in October. However, over the prior three months new orders continued to grow but at much slower pace than earlier in the year.

Part of the reason for the drop in orders in October, which spanned six of the seven major durable goods industries, was due to the fact that since May inventory investment has been outpacing shipments. Manufacturers have accumulated excess inventories given the current pace of demand, and as a result there is an imbalance. Today’s report signals that manufacturing output will likely remain in the rough patch it’s been in since July for several more months until excess inventories are worked off.

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