Improved Aircraft Numbers Raise Durable Goods Orders, But Weaknesses Persist

By October 25, 2012Economy

The Census Bureau reported that durable goods orders rose 9.9 percent in September, recovering most of the 13.1 percent decline observed in August. There were no new orders for nondefense aircraft and parts in August, which drove the figure sharply lower. In September, nondefense aircraft and parts orders increased from virtually zero to $14.7 million. Transportation orders overall were up 31.7 percent in September (after falling 33.7 percent in August), with higher defense aircraft orders (up 27.2 percent), as well. Motor vehicle orders dropped 0.4 percent.

Excluding transportation, new orders were up 2.0 percent. August’s data was mostly down across-the-board, so sales information for September was improved in some sectors, but mixed overall. Sectors with the largest gains included machinery (up 9.2 percent), primary metals (up 4.1 percent), and other durables (up 0.6 percent). Those sectors with declining sales, though, included fabricated metal products (down 0.7 percent), computers and electronic products (down 2.5 percent), and electrical equipment and appliances (down 2.7 percent).

Meanwhile, shipments of durable goods increased 0.8 percent in September, only partially offsetting the 2.9 percent decreased in August. Excluding transportation, durable goods shipments were up 0.6 percent. The sector-by-sector shipments data were mixed, mostly falling in-line with the direction of the new orders information above. Some exceptions include defense aircraft (down 2.9 percent), fabricated metal products (up 0.4 percent), and machinery (down 0.1 percent).

Even with a large headline increase in durable goods orders in September, these data mostly confirm the weaknesses that are persistent in the manufacturing sector right now. Both shipments and new orders are below the levels experienced in July, and perhaps more troubling, core capital goods orders (or nondefense capital goods orders excluding aircraft) were unchanged for the month. This suggests an economy that is stalled, at least as far as manufacturers are concerned.

With slowing global growth and uncertainties regarding the direction of the U.S. economy, this should not be a surprise. Other indicators reflect similarly weak data for the manufacturing sector. It will be important for policymakers to act quickly to address the fiscal cliff and budget sequestration to ease business owners’ minds regarding a possible economic decline in 2013, and manufacturers also hope that pro-growth policies are adopted which will allow manufacturers to once-again flourish in the global marketplace.

Chad Moutray is chief economist, National Association of Manufacturers.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM), where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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