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First Cut: September factory orders down for a second month in a row, mainly on nondefense aircraft

New orders for all factory goods were down 0.6% in September after down 0.1% in August (previously 0.0%).  Orders for nondurables eked out a small 0.1% increase, while durables declined 1.2%, mainly on transportation orders.

Transportation was down 2.8% on a decline of 11.8% for nondefense aircraft while defense aircraft rose 6.1%. Aircraft orders at Boeing have been largely grounded since the air disasters involving its highly touted 737 MAX model. Orders have been scant for commercial aircraft and do not look set to improve any time soon. Defense aircraft orders — which have been mostly for a different model of aircraft — have been the only bright spot for Boeing. There have been numerous order cancellations that have reduced order backlogs significantly.

“Core” durables orders — orders less civilian aircraft and defense capital goods — were down 0.7% in September. These tend to follow a pattern of softer and firmer readings that is the case for September. However, overall orders for durables are weak and nondurables are at the mercy of swings in commodity prices among which petroleum plays a big part.

Unfilled orders were flat in September and without fresh orders to keep factories going, suggest conditions will remain soft. Shipments declined 0.2% in September, adding to a string of down months with less activity and therefore fewer shipments to get out of the factory. Inventories were up 0.3%, a slightly pick up in the level of goods on shelves that will likely be quickly corrected in October.

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