Durable Goods Orders Drop

Durable goods orders, down 1.2 percent in October, couldn't post three straight gains but there are positives in the report. But first the negatives which include a 33 percent reversal for commercial aircraft orders and a 0.5 percent decline for core capital goods orders (nondefense ex-aircraft). These two components have been very strong in recent months so a step back isn't a surprise, and aircraft orders appear certain to jump sharply in next month's report given Boeing's major success at this month's Dubai Air Show.

Ex-transportation offers an underlying reading and this is solid with a 0.4 percent gain. The revision to this reading for September is also positive, up 4 tenths to 1.1 percent. And core capital goods get an even bigger revision, an 8 tenths upgrade to 2.1 percent in September which helps offset October's decline. Shipments of core capital goods, which are direct inputs into GDP, are also revised higher, up 5 tenths in September to 1.2 percent with October coming in at a constructive plus 0.4 percent. Other positives in the report are a 1.7 percent rise in vehicle orders and a 1.5 percent increase in vehicle production, both of which follow the ex-hurricane spike in vehicle sales.

Other readings are mixed including very modest 0.1 percent gains for both total shipments and total inventories and a disappointing no change for unfilled orders.

This report isn't a step forward but the factory sector, nevertheless, still looks to be a positive contributor to fourth-quarter growth.

Recent History Of This Indicator:
Durable goods orders had been mixed this year but broke through to the upside in August and September with respective monthly jumps of 2.2 and 2.0 percent. Aircraft orders have been on the rise as have capital goods orders, the latter pointing to extending gains for business investment. Econoday's consensus for durable goods orders is a 0.4 percent gain with ex-transportation seen up 0.5 percent. Core capital goods orders are also expected to rise 0.5 percent. These are all very healthy rates of growth.