New Orders for Durable Goods Jumped 9.9% in September
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Implications: Orders for durable goods bounced back sharply in September after a steep drop in August. Both the drop last month and now the rebound were mostly due to extreme moves in the always volatile aircraft orders. However, taking out the transportation sector, orders were still up 2% in September, led by a 9.2% rebound in machinery. That's the good news. The bad news is that machinery orders are still down 6% from a year ago. Meanwhile, shipments of "core" capital goods, which exclude defense and aircraft, were down 0.3% in September, the third straight monthly decline. Core shipments usually fall in the first month of each quarter and then rebound in the last two months. This time, the rebound didn't happen. These figures suggest a temporary hesitation in business investment, not recession. We think some companies are postponing purchases of big ticket items until after the election, in the hopes of more clarity, and improvement, in public policy. If so, expect a rebound after the election. Monetary policy is loose, corporate profits are close to record highs, balance sheet cash is at a record high (earning almost zero interest), and we are still in the early stages of a home building recovery. All of these indicate more business investment ahead. In other news this morning, initial claims for unemployment insurance declined 23,000 last week to 369,000. Continuing claims for regular state benefits declined 2,000 to 3.254 million. These figures and other recent data are consistent with a payroll gain of about 120,000 in October, both nonfarm and private. In other news this morning, pending home sales, which are contracts on existing homes, increased 0.3% in September after a 2.6% decline in August. These figures suggest existing home sales (counted at closing) should be roughly unchanged in October.

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Posted on Thursday, October 25, 2012 @ 10:28 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.