U.S. Durable Goods Orders Beat Expectations, But Weak

Daily Forex Fundamentals | Written by TD Bank Financial Group | Oct 29 08 14:07 GMT |

U.S. durable goods orders rose by 0.8% M/M in September. Orders excluding transportation, however, declined by 1.1% M/M. The report was fairly weak, as massive downward revisions and weak capital goods orders underscore slumping capital expenditure. U.S. durable goods orders rose by a better than expected 0.8% M/M in September, following the downwardly revised 5.5% M/M drop in August (previously reported as -4.5% M/M). This was much better than the 1.1% M/M drop expected by the markets. Orders excluding transportation declined by 1.1% M/M, and were also better than the market consensus for -1.5% M/M. This drop comes on the heels of the 4.1% M/M decline in August (previously reported as -3.0% M/M). Core capital goods orders declined for the second straight month, falling by 1.4% M/M. On a year ago basis, orders are down 2.4% Y/Y, while core capital goods orders are 1.2% Y/Y higher. Despite the unexpected rise in the headline number, which was driven in large part by the 29.7% M/M surge in the volatile non-defense aircraft component, the details of the report were decidedly mixed. Orders for fabricated metals, computers and electronics, and primary metals declined, falling by 0.9% M/M, 1.4% M/M and 4.5% M/M, respectively. Conversely, orders for transportation, electrical equipment and machinery increased, rising by 6.3% M/M, 1.5% M/M and 0.5% M/M, respectively. And with shipments rising by only 0.2% M/M, the inventory to shipments ratio remained unchanged at its 7-year high of 1.63. Putting aside the surprising advance in the headline index, the crux of the report is simply that new durable goods orders remained very weak in September, and were much worse than originally reported for August. And in the coming months, we expect the tighter lending conditions and souring U.S. economic climate to cause a further reduction in the amount of capital expenditure undertaken by U.S. businesses, which will further depress durable goods orders. TD Bank Financial Group The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.