The Economy

Durable Goods Orders Rise 2.1% in September

With core capital goods orders up 1.3% last month, "business equipment investment appears to be going from strength to strength."
Matthew HellerOctober 26, 2017

Orders for U.S. durable goods in September posted the biggest gain in three months, easily beating economists’ forecasts and signalling that the rebound in manufacturing remains on track.

The Commerce Department on Wednesday said orders for long-lasting goods manufactured by U.S. companies rose 2.1% last month following a 2.0% increase in August. Economists had forecast a 0.7% gain last month.

Orders from the volatile commercial aircraft category were up 31.5%, accounting for much of the overall surge. But non-defense capital goods orders excluding aircraft rose 1.3% last month after identical gains in July and August.

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It was the third straight monthly increase for core capital goods, a proxy for business investment plans. Economists had expected a 0.5 % gain.

“Overall, business equipment investment appears to be going from strength to strength, providing further reason to believe that the economy will continue to grow at a healthy pace in the fourth quarter as well,” said Andrew Hunter of Capital Economics.

As The Associated Press reports, “Manufacturing has been improving since the middle of 2016, following a two-year slump caused by cutbacks in the energy industry and a strong dollar that made U.S. goods costlier overseas. Prospects are brighter now with the dollar weakening in value this year, which makes U.S. exports more competitive on overseas markets, and a rebound in energy drilling.”

Manufacturing accounts for about 12% of the U.S. economy and many economists believe GDP growth for the third quarter will be a solid 2.5% to 3% even though the recent hurricanes disrupted supply chains. GDP rose 3.1% in the second quarter.

The rise in orders last month was concentrated in commercial aircraft, military hardware and electronics, while orders for machinery, primary metals and electrical equipment, appliances and components fell.

“There isn’t a single area in the world that isn’t moving forward at the moment and they need American manufacturers’ machinery and equipment to help build their economies. Export demand is surging,” Chris Rupkey, chief financial economist at MUFG Union Bank in New York, told the AP.