Durable Goods Demand Falters As Expected - November 27, 2013
It has been a mixed day for economic news thus far this morning. To wit, at 8:30 (EST), the government reported both a surprising drop in initial jobless in the latest week and a moderate decline in durable goods orders of 2.0% in October. It is this latter issuance that we will focus on at this time. Please note that this was the flash report, with the full release not scheduled until December 5th. This is the latest in a succession of government surveys that have been delayed due to the partial government shutdown that was suffered early last month.
All told, the 2.0% drop in orders was in line with the expected setback of 1.9%. Of note, orders had risen by 4.1% in September. It should be noted that this is a notoriously volatile series due to the exaggerated influence of high-priced aircraft. A delay or an acceleration in airplane orders from month to month can have a big impact on results in this sector.
Accordingly, the series is also presented excluding transportation. Here, if we back out this category, we find that the so-called core rate of durable goods orders dipped by just 0.1% last month; in September, orders had been up a token 0.2%. Clearly, the trend is much less frenetic when transportation goods are backed out. Looking at transportation equipment, which last month accounted for nearly a third of the aggregate total, they fell by 5.9%; in September, such orders climbed by 13.0%. If we look only at defense aircraft, the decline last month was 20.0%; the gain was 12.0% in September.
Looking at various components of this flash report, we find that orders were up by 0.5% for primary metals and off by 1.5% for fabricated metal products. Orders for machinery also dipped, easing by 0.3%.
As to demand for electrical equipment and appliances, we find that orders were up a strong 2.8% in October, but off 0.4% the month before. So, it is hard to note a clear trend.
Looked as on the whole, the report was a mild disappointment, but not a major development. As detailed above, this is a volatile series, and month-to-month swings can be sizable due in large part to the transportation component.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.