U.S. headline durable goods orders fall sequentially in September

U.S. headline durable goods orders dropped in the month of September. Sequentially, durable goods fell 1.1 percent after an upwardly revised 0.3 percent gain seen in the prior month. The top line was slightly weaker than consensus expectations of a fall of 0.7 percent. As was expected, most of the softness in orders was in the transportation category, which dropped 2.7 percent, owing to falls in the non-defense aircraft category and in motor vehicles and parts. Most of the softness in transportation likely shows transitory influences, with Boeing orders continuing to move down after a sharp rise in July and motor vehicle orders likely held back by the GM strike that started in mid-September, said Barclays in a research report.

Stripping the volatile transportation category, orders dropped 0.2 percent sequentially, on the heels of a downwardly revised 0.3 percent rise in August. Most of the September’s weakness was focused in the key “non-defense capital goods excluding aircraft” category. Excluding transportation, orders dropped 2.1 percent on a three-month saar basis, returning to downward trajectory after a string of slightly less discouraging prints from May through August.

“With adverse fundamentals, including a soft global growth picture, the strong dollar, and elevated uncertainty regarding global growth and trade policy, we expect orders to remain on a weak trajectory in the coming months. Today's data point to continued weakness in business fixed investment, no doubt, due in part to the uncertainty arising from US-China trade tensions in September”, said Barclays.

Core capital goods orders dropped 0.5 percent sequentially in September after a downwardly revised 0.6 percent sequential fall in August. The September estimate was slightly stronger than the consensus expectations of a fall of 0.1 percent.

“The weak readings for core capital goods orders in August and September come on the heels of stronger readings from May through July, placing orders more in line with the ongoing weakness in advance indicators such as the ISM manufacturing index”, added Barclays.