Durable Goods Orders Unexpectedly Creep Upwards in August

Andrew Klips |

The Commerce Department released data Wednesday morning on durable goods orders, items ranging from blenders to aircraft that are meant to last more than three years, for August that showed a modest uptick in orders against economist calls for a deceleration from July.

During August, new orders for long-lasting items increased $300 million, or 0.1 percent, to $224.9 billion.  It was the fourth month of increases in the last five months and follows a sharp drop of a revised 8.1 percent in July (originally estimated a 7.3% drop).  Economists expected a 0.5-percent decline in August.  The increase is a matter of interpretation given the July plunge that was revised even wider.

The August increase was paced by a 2.4-percent jump in orders for new cars, marking the sharpest month-over-month increase since February as auto sales hit their highest level since December 2007.  New orders for transportation equipment, a segment known to produce wild swings month to month, rose 0.7 percent in August after diving 21.9 percent in July from June.  Industry giant Boeing Co. (BA) reported only 16 orders for commercial airplanes in August, down from 90 in July and 287 in June.

Holding down the rise in new orders in August were computers and electronics (-3.4%), primary metals (-0.5%) and appliances (-0.5%).

Machinery orders (+0.9%) and fabricated metal products (+0.3%) helped boost new order figures.

Excluding the transportation category, new orders decreased by 0.1 percent, surprising economist predictions of a 1.0-percent increase.  In July new orders ex-transportation declined by 0.5 percent.

The report also showed that new orders for so-called core capital goods (aka “core capex,” or “non-defense capital goods excluding aircraft”), a proxy of future business spending, rose by 1.5 percent in August after a 3.3-percent decrease in July.  Shipments of core capital goods, which are closely watched because they are a component of GDP calculations, rose 1.3 percent, reversing course from declines in June and July of 1.0 percent and 1.4 percent, respectively.

New orders for defense capital goods sank 6.5 percent in August, after dropping 23.7 percent in July, likely related to large government spending cuts known as the sequester in March.

The mixed durable goods report didn’t have much of an impact on Wall Street, with stocks teetering around flat in Wednesday trading with the main focus on angst in Washington over a potential shutdown of the majority of government offices in October if a budget deal isn’t struck.  Also keeping a thumb on markets is bickering amongst politicians once again over the debt ceiling, which needs to be raised in order to avert the government defaulting on payments.

An hour and a half into Wednesday trading, the Dow Jones Industrial Average is down by 10 points, the S&P 500 is off 2 points and the Nasdaq has lower by 2 points.

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