The Census Bureau reported that new orders for durable manufactured goods fell 0.7 percent in October, but the decline was mostly attributable to nondefense aircraft. (All percentages are in annual terms.) Airplane orders are sporadic, creating a lot of volatility in these numbers. (Note that Boeing just received an order for 230 planes from Lion Air, which will show up in the November shipments data.) Outside of aircraft, the transportation sector had stronger gains, with new orders for motor vehicles rising 6.2 percent. When you exclude transportation from the durable goods numbers, new orders rose 0.7 percent.
Other sectors with strong new order gains for the month included primary metals (up 3 percent), machinery (up 1.6 percent) and all other durable goods (up 1.2 percent). In addition to transportation, other areas with the largest weaknesses for new orders were capital goods (down 6.2 percent), electrical equipment (down 5.2 percent) and communications equipment (down 1.6 percent).
I focus on new orders because it is a good proxy for future production, but this report also notes current activity. Shipments of durable goods increased 1.3 percent in October, reversing the decline from September of 0.5 percent. In this case, the transportation sector led the pack with 5.2 percent higher shipments than the previous month, including 6.4 percent and 8.6 percent gains in motor vehicles and nondefense aircraft shipments, respectively.
Unfilled orders and inventories grew 0.2 percent and 0.5 percent, respectively, in October, continuing a long streak for both of them.
Overall, this report is more positive than the headline number suggests, and yet, the lower capital goods figures suggest that weaknesses persist in the sector. Excluding aircraft, new orders and shipments for capital goods were down 1.8 percent and 1.1 percent, respectively. Moving forward, a stronger recovery will hinge on those numbers turning around.
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