skip navigation

By the Numbers

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

The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.

October Durables Orders Come in Soft

Orders for durable goods declined 4.4% in October, on top of a -0.8% revision to September estimates. That headline number includes extremely volatile orders for aircraft. The more closely watched durables measure focuses on nondefense durables orders excluding transportation equipment (thus aircraft). That measure showed a 0.2% gain in October, but even its gain was more than offset by a -0.6% revision to September.

This latter, "core" durables measure has now been essentially flat for the last six months (up at a 0.9% annualized rate), after having risen at a nice, 9.0% annualized clip over the 19 months since September 2016. Other measures of headline durables orders have stalled similarly.

Within durable goods another closely watched aggregate is new orders for capital goods excluding aircraft. That series registered no change in October (-0.04%, to be exact), but its September level was revised by -0.5%.

Capital orders have been heading lower for the last three months, not as long-lived a stall as that for total durables and less noticeable than the “head fake” declines observed late last year. (See chart.) This series is volatile enough that the recent declines are something less than decisive. Nevertheless, the recent softness in capital good and in durables in general is concerning.

As we discussed in our "By the Numbers" installment on November 9, all the better US growth of the last two years has come from manufacturing and mining. The manufacturing gains have been driven by capital spending and exports, mining by a rebound in the oil patch. With trade wars darkening the export outlook and with oil prices plunging recently, two of the economy’s recent drivers are in jeopardy, and now the growth in capital spending activity is looking challenged.

Nothing in this picture threatens recession, but it does increase the chances of economic growth slowing to the 2.0%-2.25% range suggested in the aforementioned November 9th installment. Such growth would be below the Fed’s forecasts, and we think it would be a challenge to the pace of rate hikes suggested by recent Fed commentary.

Orders for Nondefense Capital Goods
Orders for Nondefense Capital Goods
Source: Census Bureau. As of 31 Oct 18

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 44 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 2021. 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”) (FRN 145930). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK as defined by the FCA. This communication may also be intended for certain EEA countries where Western Asset has been granted permission to do so. For the current list of the approved EEA countries please contact Western Asset at +44 (0)20 7422 3000.