Durable Goods Look Quite Durable for October

Each report on Durable Goods feels like a bit of a wild card. After all, things like cars and planes and a whole host of other big-ticket capital goods are very volatile during good times and hard times alike. The headline Durable Goods reading was up 3.0% (by $6.9 billion) in October to $239.0 billion, double the consensus estimate of a 1.5% gain published by Bloomberg.

The ex-Transportation Durable Goods report, which could have been skewed by the Dubai Air Show, were up by 0.5% in October. Bloomberg was calling for a gain of 0.4%.  Excluding defense, new orders increased by 3.2%.

A core reading of Durable Goods is the non-defense capital goods orders excluding aircraft — this new orders reading was up by 1.3% to $70.046 billion.

New orders were higher in many categories. Computer orders rose 5.5% and communications equipment rose by 1.8%. New orders for machinery were up 1.6%. Total inventories were shown to be up by 0.2%, and the inventories to shipments ratio ticked up to 1.66 from 1.64 — and unfilled orders were up 0.3%..

One concern was seen in the total shipments being down by 1.0% in October. That gets the fourth quarter off to a slow start, and it may not lead to great trends for GDP in the fourth quarter. Capital goods shipments were down by 0.4%.

Another boost here was seen in the revisions for September with all being less bad to better. New Orders were revised to -0.8% from a -1.2% preliminary reading. Ex-transport orders were revised to -0.1% from -0.4% in September, and core capital goods were revised to a gain of 0.4% versus a prior read of -0.3%.

Again, the Commerce Department’s monthly reading on Durable Goods is extremely volatile. You can get big upside surprises in hard times and you can get big downside shocks even in good times. Sometimes it is just around the timing or recognition of orders. That caveat said, the Durable Goods report for October, coupled with higher revisions across the board for September, should be considered a positive report when it is all said and done.