New orders for factory goods dipped 0.6% in November after an unrevised down 2.1% in October. The decline was entirely due to a 1.9% decrease in nondurables that was largely from a sharp fall in petroleum. The decrease in nondurables was well anticipated. Durable goods orders were up 0.7% on a boost from the transportation component. Transportation was up 3.0% on strong orders for nondefense aircraft (+6.9%) and defense aircraft (+31.2%). The durables side was already known before the report. On net, factory orders were weaker than expected, but the November data is now relatively old. Markets will want a look at the December numbers before having a firm sense of what occurred in the fourth quarter 2018.
“Core” durables – durables orders minus civilian aircraft and defense capital goods – was down 0.4% in November, a smaller decline than the 2.3% drop in October. Surveys of activity for the factory sector have pointed to a slowdown at the end of 2018, although by-and-large expansion continued.
With the decline in petroleum prices in November – which continued into into December – the dollar value of shipments for nondurables brought the total for shipments down 0.6%, although durables shipments were up 0.7%. Shipments of capital goods excluding aircraft – which can serve as a proxy for business fixed investment in GDP – were up a solid 16.9% in November.
The dollar value of unfilled orders and inventories were not much changed in November from October. There is plenty of backlog to keep activity going for a while and inventories are sufficient to meet demand.
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