US Durable Goods Orders: Continued firming in factory sector data - Wells Fargo

US Durable Goods Orders rose 2.2% in Septeimber above the 1% expected. Analysts from Wells Fargo point out that core capital goods orders and shipments, are both rising at the fastest three-month average annualized pace in years.

Key Quotes: 

“Preliminary data on durable goods orders in the United States showed a continued firming in factory sector data to end the third quarter. Durable goods orders rose 2.2 percent in September, boosted by another doubledigit jump in the volatile civilian aircraft component. Communications equipment also posted a suspiciously large gain, so there may have been some additional noise generated by the recent release of the new iPhone.”

“Economic data for August and September have been impacted to varying degrees by the dual-impact from hurricanes Harvey and Irma. In the durable goods series, one area where we were watching for a hurricane impact was the vehicle orders component. New orders for vehicles & parts rose a scant 0.1 percent in September. Although this data is still fairly preliminary, this early signal suggests that storm replacement demand may not be enough to reignite autos production given the high levels of inventories and slower trend in the pace of sales.”

“With three-quarters of the year in the books, the recovery in the factory sector that has taken place in 2017 has built momentum in the second half of the year. The strong dollar/weak global growth/falling commodity price story that characterized the past two years has reversed in 2017, turning these headwinds into tailwinds for the sector. Manufacturers have responded by increasing payrolls by 104,000 jobs this year. Given the possible noise in the data from hurricanes and other factors, however, we will be watching future releases particularly closely.”