U.S. durable goods orders fall in October, equipment investment likely to rise in remainder of 2016

U.S. core durable goods orders and shipments remained steady in October. Durable goods orders declined 4.6 percent in October, consistent with consensus expectations of a decline of 4.8 percent. Nondefense aircraft dropped 73.5 percent after a 94.6 percent increase in October. Core capital goods orders were consistent with projections, rising a strong 0.9 percent sequentially.

Core capital goods shipments also rose in the month, growing 0.2 percent sequentially. Core capital goods orders and shipments are a significant input to the BEA’s estimate of equipment investment in GDP. Equipment investment is expected to rise in the remainder of 2016, stated Barclays in a research report.

Orders as well as shipments have not displayed a sustained upward movement that would show a near-term acceleration in equipment investment, but capital goods orders and shipments appear to have stabilized. Given the detail of the report, widespread strength is expected. Most categories of orders and shipments recorded strong gains, with the exception of aircraft orders.

Overall, the report for October indicates modestly weaker-than-anticipated aircraft shipments, countered by slightly more rapid inventory accumulation than was expected, added Barclays.