By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

Sign up to receive email updates as new reports are released.

October Durables Orders Rise Further Net of Noise

New orders for manufactured durable goods declined 1.2% in October, with September orders unrevised. This decline was due to a pullback in bloated orders for aircraft, as can be seen from the fact that orders for durables excluding transportation equipment rose 0.4% in October, with a +0.4% revision to September.

Of special interest within this report are data on capital spending. New orders for nondefense capital goods excluding aircraft declined by 0.5% in October, mostly offset by a +0.4% revision to September’s level. The October declines in CAPEX orders are only a slight offset to very strong September gains, indeed to strong gains throughout the last few months. The accompanying chart tells the story.

There is a lot of month-to-month chop in CAPEX orders, and the declines reported for October are, if anything, smaller than the momentary declines seen during past uptrends in CAPEX orders…and also smaller than the momentary gains seen during downtrends. In other words, there is nothing in today’s data to cast any serious doubt on the uptrend seen in CAPEX orders over the past 16 months.

Given that overall durable goods orders (excluding transportation equipment) showed further gains in October, the uptrend there is even more firmly in place. Meanwhile, it is also clear from the chart that the declines in aircraft orders reported for October are well within the range of the trendless motion seen there for the last three years.

Manufacturing has been the bright spot for the economy this year, offsetting decelerations in both residential and nonresidential construction enough to produce a modest acceleration in overall growth. Given that there has been no pickup in US final demand for manufactured goods outside the CAPEX sector, we have been skeptical that the factory upturn could continue.

Well, the October data for US manufacturing continue to fly in the face of those fears. Factory payrolls, industrial production, and durable goods orders all showed nice gains in October, indicating that the factory upturn is continuing into the fall of 2017.

Orders for Nondefense Capital Goods
Orders for Nondefense Capital Goods

Source: Census Bureau. As of 31 Oct 17

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 42 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

Sign up to receive email updates as new reports are released.

© Western Asset Management Company, LLC 2019. This publication is the property of Western Asset and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. This publication is for informational purposes only and reflects the current opinions of Western Asset. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorised and regulated by Comissão de Valores Mobiliários and Banco Central do Brasil. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan. Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority (“FCA”). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK and EEA countries as defined by the FCA or MiFID II rules.