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First Cut: October durables orders rise on defense capital goods

New orders for durable goods rose 0.6% in October from September, a modest increase that was fairly broad-based. The transportation component usually accounts for much of the month-to-month variation, but this time around the 0.7% increase left durables excluding transportation up 0.6%. Much of the rise could be accounted for in the defense capital goods component which rose 16.6% in October. Excluding defense orders, durables were up only 0.1%.

Transportation orders increased on gains for nondefense aircraft (up 10.7%) and defense aircraft (up 18.1%) while orders for motor vehicles declined (down 1.9%). Boeing actually reported a decline of 15 in new orders in October from September. Some of the increase may be related to late booking of earlier orders. In any case, the increase is only relative to weak levels of orders rather than robust conditions seen in recent years.

“Core” new orders — durables orders less civilian aircraft capital goods and defense capital goods — declined 1.0% in October. This is consistent with strong increase for defense order in the month and suggested that civilian new orders for durables continued to languish.

Unfilled orders were up 0.1%, in part on the backlog for aircraft orders that has continued to suffer from cancellations of previous contracts for the 737 MAX aircraft from Boeing.  Shipments were flat in October due to sluggish new orders and less backlog to keep activity going. Inventories were up 0.3% while goods are moving more slowly. Stockpiles of goods aren’t yet building up to uncomfortable levels. Businesses have acted quickly to ensure this doesn’t happen should the economy experience a downturn, not just slower growth.

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