 | New Orders for Durable Goods were Unchanged in October |
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| Posted Under: Data Watch • Durable Goods |
Implications: The plow horse economy continues to push forward. Orders for durable goods came in much better than expected in October as companies seem to be gaining more confidence. Although on the surface new orders for durable goods were flat in October, this was completely due to the always volatile transportation sector. Taking out transportation, orders were up 1.5% in October, led by a 2.9% gain in machinery. That's the good news. The bad news is that machinery orders are still down 9.6% from a year ago. Meanwhile, shipments of "core" capital goods, which exclude defense and aircraft, were down 0.4% in October, the fourth straight monthly decline. Core shipments usually fall in the first month of each quarter and then rebound in the last two months. That did not happen in the third quarter as companies held back due to economic uncertainty surrounding public policy. That uncertainty will continue in the near term as lawmakers try to hash out an agreement to avoid the "fiscal cliff." Eventually, though, we think a stronger trend emerges. Monetary policy is loose, corporate profits are close to record highs, balance sheet cash is at a record high (earning almost zero interest), and the recovery in home building is picking up steam. All of these indicate more business investment ahead. In other news this morning, the Case-Shiller index, which measures home prices in the 20 largest metro areas, increased 0.4% in September (seasonally-adjusted) and is up 3% from a year ago. Nineteen of 20 metro areas saw higher prices in September as well as in the past three months, led by San Diego, Atlanta, and Phoenix. The one exception is Chicago. In other housing news, the FHFA index, which measures prices for homes financed by conforming mortgages, increased 0.2% in September (seasonally-adjusted) and is up 4.4% from a year ago. On the factory front, the Richmond Fed index, a survey of mid-Atlantic manufacturers, rose to +9 in November from -7 in October, much better than the consensus expected -9.
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