Reduced Aircraft Sales and Broader Weaknesses Send New Durable Goods Orders Lower in October

By November 27, 2013Economy, General

The Census Bureau said that new durable goods orders declined 2.0 percent in October. This data has been highly volatile over the past year or so, with wide swings due largely to increases or decreases in aircraft sales. Indeed, following a significant increase in September, defense and nondefense aircraft orders were off sharply in October. If you were to exclude transportation orders from the analysis, new orders would have fallen by just 0.1 percent.

On a year-over-year basis, durable goods orders have been on a slow-but-steady rise higher, with sales up 5.3 percent between October 2012 and October 2013. Excluding transportation, new durable goods orders rose 4.3 percent. Still, in the broader durable goods sector, growth has been relatively flat for much of this year. Indeed, new durable goods orders excluding transportation have edged only marginally higher since January, up just 0.9 percent. This suggests broader weaknesses in the manufacturing sector despite recent improvements in activity seen in other indicators.

Looking at the various sectors, new orders data were mostly mixed, reflecting this weakness. There were increased sales in October in the electrical equipment and appliances (up 2.8 percent), motor vehicle and parts (up 1.7 percent), primary metals (up 0.5 percent), and computers and electronic products (up 0.3 percent) sectors. Yet, these gains were counterbalanced by reduced new orders in the following segments: fabricated metal products (down 1.5 percent), machinery (down 0.3 percent), and all other durable goods (down 0.1 percent).

Core capital goods – or nondefense capital goods excluding aircraft – were down 1.2 percent, further highlighting softness in total durable goods sales in October. Yet, on a year-over-year basis, new core capital goods orders have risen 3.6 percent, suggesting modest gains overall.

Meanwhile, shipments of durable goods increased 0.2 percent in October, the third straight monthly gain. Since July, shipments have risen 1.7 percent, with year-over-year growth of 4.8 percent.  The largest increases in October shipments were in the nondefense aircraft and parts (up 2.4 percent), motor vehicles and parts (up 1.7 percent), machinery (up 0.8 percent), and primary metals (up 0.5 percent). These were somewhat offset, though, by declining shipments in the computer and electronic products (down 2.6 percent) and defense aircraft and parts (down 1.2 percent).

Chad Moutray is the chief economist, National Association of Manufacturers. durable goods

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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