US: October durable goods orders sustain Q4 momentum - Nomura

US durable goods orders fell 1.2% m-o-m in October, below expectations (Nomura: 0.1%, Consensus: 0.3%), weighed down by a sharp decline in volatile civilian aircraft orders, notes the research team at Nomura. However, orders excluding transportation increased solidly by 0.4%, mostly in line with expectations (Nomura and Consensus: 0.5%), they further adds. 

Key Quotes

“Civilian aircraft orders, which tend to be highly volatile, dragged down topline durable goods orders in October with an 18.6% drop during the month. New orders for vehicles and parts rebounded to a 1.7% increase after falling 0.1% in September. Excluding transportation equipment, durable goods orders rose steadily by 0.4%, following an upwardly revised increase of 1.1% (previously reported as 0.7% m-o-m).” 

“The gains were broad-based across components excluding transportation equipment. Primary metals orders rose 1.3% and machinery orders increased 0.6%. Orders for computers & electronics and electrical equipment were up 0.4% and 0.8%, respectively. Durable goods orders excluding transportation have increased steadily over the past four months, the longest stretch since 2010, highlighting stronger-than-expected growth over the past two quarters with firming contributions from the industrial sector.”

“Core capital goods shipments, a proxy for equipment investment in GDP, increased 0.4% m-o-m in October, following an upwardly-revised 1.2% increase in September. These readings point to sustained equipment investment in the current month. However, a 0.5% decline in core capital goods orders, upstream from shipments, suggests some downside risk to equipment investment over the next few months. The decline in core capital goods orders was the first in four months.”

“GDP tracking update: Core capital goods shipments in September were revised up and the increase in October was mostly in line with expectations. Although weaker-than-expected core capital goods shipment suggests softer equipment investment in Q4, after rounding our Q4 real GDP tracking estimate remains unchanged at 2.5% q-o-q saar.”