Durable Goods Hang Positive, but Showing Softness

The monthly reporting for durable goods can be very volatile. Sometimes durable goods orders are strong in a weak economy, and sometimes they are weak in a strong economy. A lot of the big-ticket and long-lasting items just have very lumpy orders until they are broken down into groups. Even a few airplane orders or military orders can skew the broader report.

The U.S. Commerce Department reported that August’s new orders for manufactured durable goods increased by 0.4% ($1.0 billion) to $232.8 billion. That marked the fourth monthly headline gain in a row, but it was handily lower than the 11.7% gain from July. The 0.4% gain was also more than a point lower than the 1.5% consensus estimate from Econoday and even worse against the 1.8% consensus from Dow Jones.

Excluding transportation, new orders were also up by 0.4%. Econoday’s consensus there called for a gain of 1.2%, and the July reading was revised to 3.2% from 2.4%.

Excluding defense, new orders for durable goods increased by 0.7%. Orders rose by 1.5% for machinery in August.

The one big portion of the durable goods that is watched rather closely is the new orders for nondefense capital goods excluding aircraft, or the core capital goods reading. This core durable goods report was up by 1.8% in August. Econoday was calling for a 1.7% gain and July’s core reading was revised up to a gain of 2.5% from the preliminary 1.9% gain.

While these are volatile, the slower readings in durables were across the board when compared to July. The numbers also correlate with the slowing recovery that was starting to be seen in August. Still, manufacturing data remain in recovery and there are higher shipping index readings for the coming months.

The report on inventories was looking light yet again. Inventories fell by $0.5 billion (0.1%) to $420.5 billion in August. That was its third consecutive monthly decline and it followed a 0.8% July decline in July.

Stocks were still in the red on Friday, but not as much as the indexes were down earlier in the morning. The Dow Jones industrials were down 0.35% at 26,722 and the S&P 500 was down 0.12% at $3,242.80. The Nasdaq actually was up 0.3% at $10,705 in mid-morning trading on Friday.

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