Today’s durable goods orders provides a fairly good summary of the overall economic picture in the USA currently. The environment is growing, but sluggish when you look under the hood. Durable goods tend to have a fairly high correlation with the equity markets so this sideways movement in the data could be a sign that the recent move in equities is extended. Econoday provides an excellent overview of the report:
“Aircraft orders lifted overall durables sharply in September but ex-transportation components are mixed and net down. New factory orders for durable goods in September rebounded 3.3 percent, following a 1.0 percent decrease in August. The gain in September came in significantly above the consensus forecast for a 1.6 percent boost. Excluding transportation, new durables orders fell back 0.8 percent, following a 1.9 percent increase in August.
By major industries, transportation led orders up, jumping 15.7 percent in September after declining 8.8 percent the prior month. Nondefense aircraft soared a monthly 105.0 percent after dropping 30.0 percent the month before. Defense aircraft orders advanced 30.0 percent in September while motor vehicles slipped 0.4 percent.
Other components were mixed but more down than up. Declines were seen in primary metals, down 0.5 percent; fabricated metals, down 1.6 percent; computers & electronics, down 4.0 percent; communications equipment, down 18.6 percent; and “all other,” down 0.1 percent. Gains were seen in machinery, up 2.0 percent, and in electrical equipment, up 0.4 percent.
Business investment in equipment continues to oscillate between positives and negatives due to its inherent monthly volatility and only moderate uptrend. Nondefense capital goods orders excluding aircraft in September slipped 0.6 percent after jumping 4.8 percent in August. Shipments for this series continued to edge up, rising 0.4 percent in September after gaining 1.3 percent the prior month.
Year-on-year, overall new orders for durable goods in September held steady at up 12.2 percent. Excluding transportation, new durables orders eased to up 9.5 percent from 13.6 percent the prior month.
The bottom line is that durables excluding transportation have been typically volatile but essentially flat over the last few months. Growth in manufacturing appears to be slowing at least for the near term.”
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.