Durable goods orders reflect the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. The first release, the advance, provides an early estimate of durable goods orders. About two weeks later, more complete and revised data are available in the factory orders report. The data for the previous month are usually revised a second time upon the release of the new month's data. (Bureau of the Census, U.S. Department of Commerce) Why Investors Care
| Released on 11/28/07 For Oct 2007 | ||||||||||||
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Highlights
Durable goods orders in October continued a recent downtrend, indicating that the economy is in a rough patch. Durable goods orders fell 0.4 percent in October, following a 1.4 percent decline in September. The decrease in October was well below the market forecast for a 0.3 percent boost in new durables orders but the durables series is very volatile. Excluding the transportation component, new orders fell 0.7 percent in October, following a 1.1 percent rebound in September.
Weakness in durables orders in October was led by communications equipment and computers. Transportation is the usual culprit but this component actually posted a modest increase for the month. Industry categories showing declines in October were machinery, down 1.7 percent; computers & electronics, down 8.4 percent; and communications equipment, down 22.6 percent.
It was not all bad news for the month. Industry categories posting gains in October were primary metals, up 3.0 percent; fabricated metal products, up 2.3 percent; electrical equipment, up 4.1 percent; and transportation, up 0.2 percent.
Nondefense capital goods orders, however, fell 0.7 percent in October after rebounding 4.8 percent the prior month.
Year-on-year, new orders for durable goods rose to up 1.9 percent in October from down 6.2 percent in September. October 2006 was particularly weak. Unfilled durables orders came in at up 17.9 percent year-on-year in October, compared to up 18.1 percent in the prior month.
Today's report is mixed in terms of some industries being up while others are down. But overall, manufacturing appears to be soft in the fourth quarter. It looks like the economy is headed into the rough patch that a number of Fed speakers have been expecting. Bonds should like the report. Fed Speak is under way, focusing on pragmatism and that is likely to have a positive effect on both bonds and equities. This Fed Speak is a new tune compared to others who have focused on the belief that current monetary policy is adequate.
Durable goods orders are pointing to a slow-down in manufacturing as they declined 1.7 percent in September after dropping 5.3 percent in August. Orders did jump 5.9 percent in July, but July was before the troubles of August. September's weakness was centered in defense orders. Excluding defense, orders rose 0.7 percent in the month, though the gain follows a steep 6.2 percent dip in August. More recently, manufacturing surveys have been mixed with the Empire State index for November coming at a moderately strong level while the Philly Fed index was barely in positive territory.
New orders for durable goods Consensus Forecast for October 07: +0.3 percent
Range: -2.2 percent to +1.4 percent
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Monthly fluctuations in durable goods orders are frequent and large and skew the underlying trend in the data. In fact, even the yearly change must be viewed carefully because of the volatility in this series. |
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