The combined report of factory orders for August and September revealed weakness in orders activity leading up to the government shutdown. Outside the volatile transportation sector, orders fell both months.
In a typical month, the factory orders report follows about a week behind the durable goods orders report. The “new” data in factory orders is concentrated on bookings for non-durable goods, though sharp market watchers look for revisions to the previous week’s durable goods orders numbers as well. At present, the non-durables orders comprise a slightly greater than 50 percent share of all orders. But, as the middle graph shows, durable goods held the dominant position prior to the recession and appears to be on track to regain the larger share.
The August durable goods report hit the wire September 25th just days before the shutdown began on October 1st. The timing of the shutdown happened to fall in the week that separates the durables and factory orders reports—this is the reason why we get the combined August/September report. It made more sense to simply pick up the normal schedule with the advance durable goods report last week and combine factory orders into one report released today.
So, to some extent, we already had an idea of how orders activity held up during these two months through the durable goods reports. What emerged from those reports was a picture of weaker orders for core capital goods disguised by a September surge in aircraft orders.
Outside the volatile transportation sector, orders fell 0.4 percent in July and another 0.2 percent in September. Core capital goods orders are now falling at a 7.2 percent annualized rate.
Were it not for generally strong purchasing managers’ survey data we would be getting quite pessimistic about the outlook for the factory sector. It will be interesting to see if October orders figures live up to the generally bullish sentiment we have seen in the surveys.
So Why the Double Header for This Indicator and Not Others?
Today the Commerce Department took the unusual step of releasing the August and September factory orders reports concurrently. As has already been widely reported, this is due to the October government shutdown. But some background might be useful here to understand why we get a “double header” for the factory orders report, one of the select few to receive this treatment.In a typical month, the factory orders report follows about a week behind the durable goods orders report. The “new” data in factory orders is concentrated on bookings for non-durable goods, though sharp market watchers look for revisions to the previous week’s durable goods orders numbers as well. At present, the non-durables orders comprise a slightly greater than 50 percent share of all orders. But, as the middle graph shows, durable goods held the dominant position prior to the recession and appears to be on track to regain the larger share.
The August durable goods report hit the wire September 25th just days before the shutdown began on October 1st. The timing of the shutdown happened to fall in the week that separates the durables and factory orders reports—this is the reason why we get the combined August/September report. It made more sense to simply pick up the normal schedule with the advance durable goods report last week and combine factory orders into one report released today.
So, to some extent, we already had an idea of how orders activity held up during these two months through the durable goods reports. What emerged from those reports was a picture of weaker orders for core capital goods disguised by a September surge in aircraft orders.
What Did We Learn That Was New?
The new data contained in today’s report suggests deterioration in manufacturing orders for both August and September. Non-durable goods orders fell 0.6 percent in August and another 0.2 percent in September. The headline increase of 1.7 percent in overall factory orders was mostly attributable to a 57.7 percent surge in aircraft orders. Even with the help from aircraft, the September increase was not nearly enough to offset the 2.8 percent drop in July and the 0.1 percent decline in August.Outside the volatile transportation sector, orders fell 0.4 percent in July and another 0.2 percent in September. Core capital goods orders are now falling at a 7.2 percent annualized rate.
Were it not for generally strong purchasing managers’ survey data we would be getting quite pessimistic about the outlook for the factory sector. It will be interesting to see if October orders figures live up to the generally bullish sentiment we have seen in the surveys.
Recommended Content
Editors’ Picks
EUR/USD turns negative near 1.0760
The sudden bout of strength in the Greenback sponsored the resurgence of the selling pressure in the risk complex, dragging EUR/USD to the area of daily lows near 1.0760.
GBP/USD comes under pressure and challenges 1.2500
GBP/USD now rapidly loses momentum and gives away initial gains, returning to the 1.2500 region on the back of the strong comeback of the US Dollar.
Gold retreats from highs on stronger Dollar, yields
XAU/USD trims part of its initial advance in response to the jump in the Dollar's buying interest and the re-emergence of the upside pressure in US yields.
XRP tests support at $0.50 as Ripple joins alliance to work on blockchain recovery
XRP trades around $0.5174 early on Friday, wiping out gains from earlier in the week, as Ripple announced it has joined an alliance to support digital asset recovery alongside Hedera and the Algorand Foundation.
Week ahead – US inflation numbers to shake Fed rate cut bets
Fed rate-cut speculators rest hopes on US inflation data. After dovish BoE, pound traders turn to UK job numbers. Will a strong labor market convince the RBA to hike? More Chinese data on tap amid signs of slow Q2 start.