The Census Bureau reported that durable goods orders were unchanged in October. This figure has been highly volatile in the past couple months, with no new orders for aircraft and parts in August and only a partial recovery in September. Durable goods orders remain 5.1 percent lower in October ($216.9 billion) than the level observed in July ($228.6 billion).
Reduced sales in the transportation sector (down 3.1 percent) were the largest factor in dragging total durable goods orders down to virtually no growth. New orders for nondefense and defense aircraft and parts were down 5.8 percent and 4.3 percent, respectively. It is important to note here that both were up significantly in September, with defense aircraft spending up in September largely the result of end-of-fiscal-year spending. Motor vehicle sales were also down 1.6 percent.
If you were to exclude the transportation sector, new orders would have risen 1.5 percent. This puts a more positive spin on the overall numbers, and most of the major sectors outside of transportation experienced improvements in sales. The largest gains in new orders in October were in electrical equipment and appliances (up 4.1 percent), machinery (up 2.9 percent), primary metals (up 1.7 percent), and fabricated metal products (up 1.1 percent).Sharply lower sales were reported for computers and related products (down 9.3 percent).
Meanwhile, shipments of durable goods declined 0.6 percent in October, reversing the 0.5 percent increase in September. Shipments remain 3.0 percent lower in October ($222.2 billion) than in July ($229.0 billion), reflecting recent weaknesses. Shipments were soft across-the-board, with capital goods down 0.7 percent.
These figures provide mixed news on the durable goods front. On the one hand, the sector has yet to fully recover from declines in sales and shipments experienced over the past three months, and shipments of durables continue to be weak. Yet, outside of transportation, new orders have risen for two consecutive months, which should bode well for improved future activity. Whether or not that can be sustained will depend on improvements in the global economic outlook, as well as lifting the uncertainties created by the fiscal cliff and other headwinds.
Chad Moutray is chief economist, National Association of Manufacturers.