Economy

Durable Goods Orders Signal Slowing Economy

November 23, 2018

Durable goods orders fell 4.4 percent in October, heralding a weak start to the fourth quarter and a softening in business investment. The drop was the steepest monthly decline since July 2017.

Volatile aircraft orders drove most of the decline, with commercial aircraft orders diving 21.4 percent and defense aircraft orders plummeting 59.3 percent. Orders for core capital goods, manufactured goods excluding defense and aircraft and a measure of business investment, were flat in October after two months of decline.

Shipments fell 0.6 percent last month after increasing in August and September.

“Looking ahead, we expect momentum to continue to fade as reduced tailwinds from fiscal stimulus dissipate and rising headwinds from slower global growth, reduced energy investment and heightened trade tensions start weighing on capex plans,” said economists at Oxford Economics.

The October advance report on manufacturers’ shipments, inventories and orders follows:

New Orders

New orders for manufactured durable goods in October decreased $11.5 billion or 4.4 percent to $248.5 billion, the U.S. Census Bureau announced today. This decrease, down three of the last four months, followed a 0.1 percent September decrease. Excluding transportation, new orders increased 0.1 percent. Excluding defense, new orders decreased 1.2 percent. Transportation equipment, down following two consecutive monthly increases, drove the decrease by $11.7 billion or 12.2 percent to $84.7 billion.

Shipments

Shipments of manufactured durable goods in October, down following two consecutive monthly increases, decreased $1.4 billion or 0.6 percent to $254.5 billion. This followed a 1.0 percent September increase. Transportation equipment, also down following two consecutive monthly increases, drove the decrease by $1.6 billion or 1.8 percent to $87.6 billion.

Unfilled Orders

Unfilled orders for manufactured durable goods in October, down following eight consecutive monthly increases, decreased $2.0 billion or 0.2 percent to $1,183.0 billion. This followed a 0.7 percent September increase. Transportation equipment, down following two consecutive monthly increases, drove the decrease by $2.9 billion or 0.4 percent to $815.1 billion.

Inventories

Inventories of manufactured durable goods in October, down two of the last three months, decreased $0.1 billion or virtually unchanged to $410.9 billion. This followed a 0.8 percent September increase. Computers and electronic products, down three of the last four months, drove the decrease by $0.4 billion or 1.0 percent to $43.1 billion.

Capital Goods

Nondefense new orders for capital goods in October decreased $3.3 billion or 4.2 percent to $75.3 billion. Shipments decreased $1.9 billion or 2.4 percent to $77.4 billion. Unfilled orders decreased $2.1 billion or 0.3 percent to $715.5 billion. Inventories increased less than $0.1 billion or virtually unchanged to $180.1 billion. Defense new orders for capital goods in October decreased $2.3 billion or 16.6 percent to $11.5 billion. Shipments increased $0.3 billion or 2.9 percent to $12.1 billion. Unfilled orders decreased $0.6 billion or 0.4 percent to $153.4 billion. Inventories increased $0.1 billion or 0.3 percent to $22.8 billion.

Revised September Data

Revised seasonally adjusted September figures for all manufacturing industries were: new orders, $513.3 billion (revised from $515.3 billion); shipments, $509.2 billion (revised from $509.8 billion); unfilled orders, $1,185.1 billion (revised from $1,186.5 billion); and total inventories, $680.5 billion (revised from $680.4 billion).