Durable Goods Orders Off by 1.2 Percent in October on Aircraft Sales Volatility, Long-Term Trend Remains Favorable

The Census Bureau said that growth in new durable goods orders decreased by 1.2 percent in October, ending two straight months of solid gains in August and September. The decline in October stemmed largely from significant declines in defense and nondefense aircraft and parts orders, which can often be highly volatile from month to month. (The November numbers should rebound strongly on healthy airplane demand at the Dubai Airshow.) Excluding transportation equipment, new durable goods orders were up 0.4 percent, rising for the fourth consecutive month. New durable goods orders have generally trended in the right direction over the course of the past 12 months. New durable goods orders have increased by 1.0 percent since October 2016, but these gains were more sizable when transportation equipment were excluded, up 7.4 percent year-over-year. 

Looking more closely at the various durable goods sectors in October, the data were mostly higher. There were increased sales for motor vehicles and parts (up 1.7 percent), primary metals (up 1.3 percent), other durable goods (up 1.0 percent), electrical equipment and appliances (up 0.8 percent), machinery (up 0.6 percent) and computers and electronic products (up 0.4 percent). In addition to large declines for aircraft orders and parts, as described above, there were also reduced orders for fabricated metal products (down 0.9 percent).

Despite the mostly positive readings in these sectors, new orders for core capital goods (or nondefense capital goods excluding aircraft) fell by 0.5 percent in October. This figure is often seen as a proxy for capital spending in the U.S. economy, and on that score, the long-term trend remains quite favorable. On a year-over-year basis, core capital goods have jumped 8.1 percent, up from $61.2 billion in October 2016 to $66.2 billion in this release.

Meanwhile, durable goods shipments edged up 0.1 percent in October, slowing from a gain of 1.0 percent in September. Much like the new orders data described above, shipments have trended strongly higher over the past year. Since October 2016, durable goods shipments have risen at decent rates, up 5.1 percent, with year-over-year growth of 6.7 percent when transportation equipment shipments were excluded. In addition, shipments of core capital goods have also improved mightily over the past 12 months, up 8.3 percent year-over-year.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, 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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