The Commerce Department said that orders for durable goods, products meant to last at least three years, were flat for the month of October compared to September at a seasonally adjusted $216.95 billion, indicating a cautious confidence by businesses at the start of the fourth quarter. The data topped economist predictions with conservative estimates expecting a decline in overall orders of at least 0.4 percent.
Meanwhile, September orders were downwardly revised to a gain of 9.2 percent from an original estimate of a 9.9 percent increase.
The flat month was underscored by declines in transportation (-1.6%) and defense capital goods (-7.1%), two sectors that are known for extreme volatility. It was the second straight month of sagging demand for motor vehicles and parts. Defense orders had skyrocketed in September by 37.5 percent.
The Commerce Department noted that Hurricane Sandy, which pounded the East Coast late in October, had no discernible impact on durable goods orders.
Excluding transportation and defense, so-called “core durable goods” orders increased by 1.7 percent in October, the biggest one-month jump since May. Orders for core goods, a closely watched barometer for businesses’ spending plans, contracted by 0.4 percent in September.
The softened demand in non-core goods was offset in part by a rise in orders for machinery, which grew by 2.9 percent in October, following an 8 percent increase in September. Other notable increases in bookings were seen in primary metals (+1.7%) and electrical equipment (+4.1%).
Durable goods orders holding steady is actually an optimistic sign for the state of the U.S. economy given the headwinds of the fiscal cliff, a series of tax hikes and spending cuts set to strip more than $600 billion from the economy in 2013, and the economic turmoil abroad that has underpinned demand in 2012.
Because of the month-to-month volatility of durable goods orders, economists tend to look more closely at long-term trends in orders, which are throwing mixed signals. Core orders for 2012 are essentially flat. Total orders are up nearly 5 percent for the year, although those gains have been pared by a 5 percent decrease across the past three months.
In the second quarter, orders for durable goods – items that range from microwave ovens to aircraft – had contracted modestly. In the July to September quarter, however, consumer demand increased, lifting orders by 8.5 percent. Unfilled orders in October, a proxy of future demand, rose 0.2 percent.