U.S. durable goods orders flat in August, equipment investment likely to be flat this year

U.S. durable goods orders remained flat in August and came in stronger than consensus expectations. The expected weakness was due to the likely fall in bookings for commercial aircraft, strengthened by a net decline in other areas. Consensus had projected a decline of 1.5 percent in August. But acceleration in core capital goods orders of 0.6 percent sequentially mainly pulled up the headline series.

Core capital goods shipments dropped 0.4 percent month-on-month. Core capital goods orders and shipments are a major input to the BEA’s estimate of equipment investment in GDP said Barclays in a research note. Equipment investment is expected to be roughly flat for the rest of the year, added Barclays. The strength in orders poses risk on the upside to that projection.

Manufacturers’ inventories of durable goods increased 0.1 percent sequentially and were upwardly revised in July to 0.4 percent from 0.3 percent. The two straight increases are in line with the view that the long-standing contraction in inventories might be over, according to Barclays.

Overall, the August report indicates modestly softer than anticipated strength in equipment investment countered by faster accumulation of inventories.