U.S. Durable Goods Orders Hint Better 4Q growth than Worries

Durable goods orders started the third quarter strongly, jumping up 3.0%/m (0.5% y/y) in October against an expectation of a 1.5% m/m increase. And the 1.2% m/m decline initially reported for orders in September was revised up to a 0.8% m/m drop.

Excluding orders in the transportation sector, orders rose a more modest, but still larger-than-expected, 0.5% m/m in October (-2.4% y/y) following an upwardly revised 0.1% m/m decline in September.

Especially encouraging was the performance of core capital goods orders (capital goods orders excluding defense and aircraft) in October. They rose 1.3% m/m (0.4% y/y) with the initially reported 0.1% m/m decline in September revised up to a 0.4% m/m increase.

With the September revision and October jump, core capital goods orders in October stood more than 6% at an annual rate above the 3Q average, auguring for some further improvement in business capital spending in the fourth quarter.

However, the strength in orders has yet to be reflected in actual shipments of capital goods. Core capital goods shipments (a real-time proxy for capex) slipped 0.4% m/m in October (-0.5% y/y) but after an upwardly revised 0.7% m/m rise in September.

Durable Goods	Oct	Sep	Aug	Oct Y/Y	2014	2013	2012
New Orders (SA, %)	2.99	-0.82	-2.94	0.51	6.8	2.2	6.3
Transportation	8.04	-2.24	-6.88	6.53	6.1	6.5	16.6
Total Excluding Transportation	0.53	-0.11	-0.85	-2.37	7.2	0.1	2.0
Nondefense Capital Goods	13.23	-6.05	-4.62	3.8	6.6	2.8	10.8
Excluding Aircraft	1.32	0.39	-1.45	0.36	6.3	-1.0	7.6
Shipments	-1.02	0.24	-0.50	0.09	4.8	2.0	6.3
Inventories	-0.2	-0.6	-0.2	0.7	6.1	2.4	3.8
Unfilled Orders	0.3	-0.5	-0.3	-2.1	11.4	6.4	7.5