Durable Goods Orders Rise in the United States, as the Recovery Continues

The U.S. economy continues to show more signs of recovery, as seemingly the worst recession since WWII is coming to an end, however, the U.S. economy is still rather weak amid the current challenging conditions, whereas rising unemployment and tightened credit conditions will probably continue to weigh down on economic activity over the upcoming period.

The U.S. durable goods orders were released for the month of September, durable goods rose by 1.0% inline with median estimates and following the prior revised estimate of -2.6%, while durable goods that exclude transportation rose by 0.9% following the prior revised drop of 0.4% and compared with median estimates of 0.7%.

Capital goods rose in September by 3.7%, whereas non-defense goods rose by 2.5%, while vehicles and parts orders dropped by 0.1% signaling that the end of the “cash for clunkers” program indeed weighed down on auto sales, moreover, computers and electronics dropped by 0.2%, however, machinery goods rose by 7.9%.

Shipments rose in September by 0.8% following the prior reported drop of 1.4%, while inventories continued to drop in September, as it fell by 1.0% compared with the prior reported drop of 1.5%, producers continued to adjust their inventories to meet the current sluggish demand levels, and that has been weighing down on economic growth over the past period.

Demand is still expected to remain weak over the upcoming period, and that will discourage producers from building their inventories, as rising unemployment and tightened credit conditions continue to hammer demand levels, and we won’t probably see a strong rebound in demand levels before the second half of next year.

Yet, we should expect economic activity to continue recovering over the upcoming period, as the worst of this recession seems to have passed already, and there’s only room for improvement in the upcoming period, however, we shouldn’t expect the U.S. economy to be able to recover over a strong pace, as the recovery will be slow and rather gradual.

The U.S. economy probably started to grow during the third quarter of this year, as aid from the government in addition to the recent improvement in economic activity boosted the U.S. economy, however, the most important thing now is to sustain this growth, though this is highly unlikely to happen, as we expect the economy to slowdown during the last quarter of this year.