New orders for long-lasting items in the United States gained in September, according to the Commerce Department on Friday, but only because of a surge in orders for aircraft. Otherwise, the durable goods report showed continued softness as wrangling in Washington, D.C. keeps companies’ spending at bay.
New orders for durable goods, items ranging from toasters to jumbo jets meant to last more than three years, rose 3.7 percent in September to $233.4 billion, following a revised 0.2 percent increase in August (revised up from a 0.1% gain). Economists expected new orders to rise 2.8 percent. A 57.5-percent spike in transportation drove the gain, with Boeing (BA) receiving orders for 127 new jets during the month, compared to 16 a month earlier. New orders for autos offset some of the gains in transportation, slipping 0.3 percent. Excluding the volatile transportation segment, new orders dropped by 0.1 percent, missing expectations of a 0.5-percent gain.
So-called “core” capital goods, non-military capital goods other than aircraft, declined 1.1 percent in September, representing the second decline in three months. Core capital goods are viewed as a better indicator of business investment. Shipments of core capital goods, which are used in determining gross domestic product, contracted by 0.2 percent in September, also the second drop during the third quarter.
Through the first three quarters of 2013, durable goods orders were up 3 percent, while core capital goods advanced 4.3 percent.
The slowdown in September was likely attributable to the impasse in Washington over a budget and raising the country’s borrowing limit, known as the debt ceiling. The spat ultimately lead to a 16-day partial government shutdown that kept hundreds of thousands of people at home before an agreement to prolong more budgetary decisions until early in 2014 ending the shutdown mid-month. Companies certainly curbed spending ahead of the shutdown that began October 1. Economists expect the shutdown to carve off about 0.5 of a percentage point off of fourth-quarter GDP.
The shutdown also delayed many economic reports from Washington, clouding the true condition of the economy.
Separately on Friday, the Thomson Reuters/University of Michigan consumer sentiment index plunged in October, reflecting the dismay with government-spending arguments. The index, which provides a view on current and future economic conditions, declined to 73.2 from 77.5 in September, marking its lowest level since last December.
Regardless of the weak reports, Wall Street is trekking upward. The markets reacting positively to soft reports was a trend early in the year, as it signaled that the Federal Reserve would continue its massive stimulus plan of purchasing $85 billion worth of Treasuries and mortgage-backed securities each month to provide a crutch for the economy. That trend seems to be in fashion once again as it does not seem likely that the central bank will hit the brakes on the policy anytime in 2013.
In morning trading, the Dow Jones Industrial Average is up by 34 points, the S&P 500 has gained 4 points and the Nasdaq has climbed 12 points.