Factory Orders Show Strength In Core Capital Goods Orders

Throw out the headline and look at capital goods. Factory orders in August edged only 0.2 percent higher but core capital good orders (nondefense ex-aircraft) jumped 0.9 percent following very impressive gains of 0.8 percent and 0.5 percent in the prior two months. These results point to a rebound for business investment which otherwise has been depressed this year.

But the new orders for capital goods will take time to fill and in the meantime business is slow as shipments of core capital goods slipped 0.1 percent following a July dip of 0.7 percent. These two readings will hold down nonresidential investment in the third-quarter GDP report, but that's pretty much ancient history.

Other readings include no change for total shipments, a fractional dip of 0.1 percent in unfilled orders, and a constructive 0.2 percent build in inventories. In sum, this report is a positive for the economic outlook.

Recent History Of This Indicator:
Factory orders are expected to slip 0.2 percent in August. Advance data on durables goods came in unchanged in August while expectations for the month's non-durable orders, due to lower energy prices, are softer. The durables report showed hints of strength in core capital goods orders.