Durable Goods Ex. Transportation Prints At -0.8%, Misses Target of 0.5%, Boeing Aircraft Orders Save The Day

Durable Goods prints at 3.3%, higher than expected 2.0% (even as the previous is traditionally revised from -1.3% to -1.0%), which however was pushed exclusively by transportation, as durable goods ex. transportation dropped by 0.8% on expectations of 0.5%, (and down from a revised 1.9%), which was the second drop in the past three months. In fact the transportation segment surged by 16%, mostly due to Boeing which announced receipt of orders for 117 aircraft, compared to 10 the month before. Remove the $6.6 billion contribution from the doubling in non-defense goods and you have a major headline miss, as the M/M change would in fact have come in negative. But just as iPads now determine the tech component of the economy, why not have one-time 787 sales define the broader GDP? Depending on adjustments, today's report may actually bias the October 29 GDP report higher. Lastly, and confirming the weakness of the September report was the Non-defense cap ex aircraft, which came at -0.6% on expectations of 0.8%.

From the report:

  • New orders for manufactured durable goods in September increased $6.3 billion or 3.3 percent to $199.2 billion, the U.S. Census Bureau announced today. Up two of the last three months, this increase followed a 1.0 percent August decrease.
  • Excluding transportation, new orders decreased 0.8 percent. Excluding defense, new orders increased 2.9 percent.
  • Transportation equipment, also up two of the last three months, had the largest increase, $7.4 billion or 15.7 percent to $54.8 billion. This was due to nondefense aircraft and parts, which increased $6.6 billion.

Note the 105% surge in nondefense aircraft orders M/M:

And here is Goldman's commetary which is in line with ours:


1. Buoyed by a doubling in bookings for aircraft, durable goods orders rose a larger-than-expected 3.3% in September. However, otherwise the report was a disappointment as other orders fell 0.8% on the month. This included a 0.6% drop in orders for nondefense capital goods excluding aircraft, a key barometer for domestic capital spending on equipment and software.

2. The report appears fairly consistent with our expectation that the Commerce Department will announce a 1.5% annualized increase in real GDP for Q3 in its preliminary estimate due Friday morning. Risks tilt modestly to the high side of this figure; however, those risks are mainly in the form of inventory accumulation that would then look high relative to the underlying trend in demand for goods.



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