US: Durables goods orders edge down on drop in Defense - Wells Fargo
|Analysts from Wells Fargo, point out that durable goods orders were little changed in September as a decline in defense spending was offset by stronger transportation orders. “Core capital goods orders fell, but they have improved on trend in recent months.”
Key Quotes:
“Durable goods orders for September came in roughly as expected. Total new orders ticked down 0.1 percent versus expectations for no change, while orders for August were revised up to 0.3 percent. Weighing on the headline was a 7.7 percent drop in defense capital goods orders. Excluding defense, orders were up 0.7 percent. Orders for motor vehicles and parts increased 1.2 percent, building on a decent print in August. Meanwhile, nondefense aircraft orders rose 12.5 percent.”
“More indicative of equipment spending for the third quarter are shipments for nondefense capital goods. Shipments in this category rose 2.2 percent in September after declining the three previous months. Despite the rebound in September, nondefense capital goods shipments in the third quarter fell at a 4.9 percent annualized rate and suggests that equipment spending could be negative in tomorrow’s third quarter GDP report for a fourth consecutive quarter.”
“The stronger trend in core capital goods orders suggests equipment spending could return to positive territory in the fourth quarter, but we do not expect a robust turnaround. While the drag from commodity-related investment is set to fade, renewed dollar strength and still sluggish global growth suggest the tough environment for the industrial sector is likely to continue.”
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