The Durable Goods Orders Report Was Terrible

Durable goods orders fell by 2.0% in October due to lower aircraft orders. This was right in line with expectations.

Still, orders excluding transportation fell 0.1%, missing expectations for a 0.5% gain.

Nondefense capital goods orders excluding aircraft — a key measure of business investment — fell 1.2%, which was much worse than the 0.8% increase expected.

“The continuing slump in US non-defencs capital goods (ex. aircraft) orders and shipments suggests that business equipment investment contracted over the entire second half of this year,” said Capital Economics Paul Ashworth. “The survey evidence on capex intentions has been pointing to a rebound in equipment investment for some time now, but it just isn’t coming through in the actual hard data.”

“The overall tone of this report was quite disappointing, signaling continued weakness in business capital investment which we expect to create a drag on economic activity this quarter,” said TD Securities’ Millan Mulraine. “The weak tone is likely due to the heightened political and fiscal uncertainties in October (at the time of the government shutdown). However, with the prospects of another government shutdown looming early next year we are unlikely to see a meaningful pick-up in investment activity in the coming months.”

Markets aren’t moving much in response to the report. Dow futures are up 15 points. S&P futures are up 1.3 points.

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