US durable goods orders rise more quickly than expected in October
Orders for goods made to last more than three years jumped past forecasts last month, amid strong demand for aircraft and a much stronger-than-expected reading for so-called core capital goods orders.
According to the Department of Commerce, US durable goods orders increased at a month-on-month pace of 0.6% in October to reach $248.7bn (consensus: -0.8%).
Excluding orders tied to the defence sector meanwhile, orders were up by 0.1% versus September (consensus: -0.3%), and without transportation they jumped by 0.6% (consensus: 0.1%).
The US automobile sector exerted the greatest drag, with orders of autos and parts shrinking at a month-on-month clip of 1.9%, which economists said was likely due to the strike at GM.
Rising orders for Boeing jets and a fourth consecutive double-digit increase in military aircraft orders more than offset the drop in auto and parts orders.
However, Ian Shepherdson at Pantheon Macroeconomics cautioned clients that: "The latter is very noisy and will soon mean-revert, likely pulling about 1% off headline orders."
On a more positive note, orders for core capital goods, which exclude those for aircraft and defence, jumped by 1.2% (consensus: -0.3%).
"These data are much stronger than implied by the ISM manufacturing orders index, which points clearly to a declining trend. The hard data are more volatile than the survey, so we have to expect a correction over the next couple of months," added Shepherdson.
"In the meantime, though, these data will lift Q4 GDP growth estimates, along with the better-than-expected trade data released yesterday. We expect the Atlanta Fed’s GDPNow measure to jump to perhaps 1%, from the current 0.4%. It will be updated later today."
"Shipments of nondefense capital goods – a proxy for business equipment investment in GDP – jumped by 1.4% m/m in October (consensus: -0.2%), its first increase since June and the strongest gain since November 2018, putting it on track to increase by 4.4% q/q annualized in Q4 following the outsized 9.5% q/q annualized decline in Q3," chipped in Mickey Levy at Berenberg Capital Markets.
"Some of the October gain was driven by a 7.8% m/m increase in shipments of nondefense aircrafts and parts -- its strongest gain since November 2018 -- which has been weighed down by Boeing issues this year."
September's decline in total durable goods orders was revised down from a preliminary print of -1.1% on the month to -1.4%.