Nominal Durable-Goods Orders Posted a Strong, Broad-based Gain in October
New orders for durable goods rose 1.0 percent in October, following a 0.3 percent gain in September. Total durable-goods orders are up 11.5 percent from a year ago. The October increase puts the level of total durable-goods orders at $277.4 billion, the second highest on record (see top of first chart).
New orders for nondefense capital goods excluding aircraft, or core capital goods, a proxy for business equipment investment, rose 0.7 percent in October after decreasing 0.8 percent in September. Orders are up 7.9 percent from a year ago, with the level at $75.3 billion.
However, price increases have had an impact on capital goods orders. In real terms, after adjusting for inflation, real new orders for durable goods increased by 0.8 percent in October, following a 0.1 percent gain in September. Real new orders for nondefense capital goods – one of AIERs leading indicators – gained 1.2 percent after a 3.4 percent jump in September (see bottom of first chart). Real new orders for capital goods are up 7.5 percent from a year ago but remain below the January 2022 level.
All but one of the seven major categories shown in the durable-goods report posted a gain in October in nominal terms. Transportation equipment jumped 2.1 percent, its third consecutive gain (see second chart). Within the transportation equipment category, nondefense aircraft rose 7.4 percent following a 23.4 percent surge in September, defense aircraft jumped 21.7 percent following a 32.6 percent drop, and motor vehicles and parts were up 0.6 percent following a 2.4 percent gain in September.
Among the other individual categories, machinery orders gained 1.5 percent, electrical equipment and appliances, and computers and electronic products had 0.4 percent increases, the all other durables category rose 0.2 percent, and fabricated metals orders added 0.1 percent. The primary metals orders category was the lone decliner, falling 0.1 percent. Durable-goods orders have posted a strong recovery from the lockdown recession measured in nominal dollars. However, after adjusting for price increases, real orders for durable goods are rising at a more modest trend growth rate in recent months.
Robert Hughes
Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.
