US Durable Goods: Warning Signs Flashing

American consumers are still spending but the trajectory is weakening and their longer sighted compatriots in the business community have stopped investing altogether.

Orders for long-lived US manufactured goods fell 4.4% in October, the largest drop in 15 months and considerably weaker than the -2.5% forecast.  The decline was due to a drop in aircraft orders which were down 21.4% for commercial planes and 59% for military aircraft.   The September figure was revised substantially lower falling to -0.1% from 0.7%.

Excluding transportation orders, that is airplanes and cars, purchases rose 0.1%, a gain of 0.4% had been expected. Here also the September release was adjusted lower to -0.6% from flat. 

Business spending, officially nondefense capital goods excluding aircraft, came in unchanged making the third month in a row without expansion. It had been predicted to rise 0.2%

Investment  had been one of the stronger supports of US economic growth in the first three quarters running at a 1.25% monthly clip from April through June. September’s result was also weaker than first reported revised down to -0.5% from  -0.1%. August was down 0.2%.

The combination of weak or nonexistent growth in consumer and business spending in October accompanied by the sharp negative revisions to the September numbers is a potent warning that the US economy may be heading into a troubled winter and spring even if shopping in the holiday season stays healthy. This report will add to the growing speculation that the Fed may pause in its three year campaign to normalize US interest rates.

Chart: Reuters