Durable Goods: Gains For Key GDP Metrics Ahead of Friday's Report

Bottom Line: Durable goods orders rose more than expected in September. Although they have fallen at a 10.9% annualized rate in the last three months, this reflects sharp swings in aircraft orders, evidenced by 72 aircraft orders in this report compared to 33 in August. Looking at the past 12 months, hardgood orders have increased at a 8.3% annualized rate. Nondefense capital goods shipments ex-aircraft, proxies for equipment and software investment, are sharply above their Q2 level, suggesting that capital spending will likely make a positive contribution to Q3 GDP growth (with the advance report due this Friday). Durable Goods Orders ROSE by 2.2% in September, compared with market expectations for an increase of 1.0%. Moreover, the prior month was revised higher from 1.7%to 2.0%. Transportation Orders ROSE by 5.1% with civilian aircraft orders climbing by 31.5% while motor vehicle orders climbed by 0.1%. Ex-transportation orders ROSE by 0.7%. Core Durable Goods Orders, those excluding both civilian aircraft and defense, ROSE by 0.68% and are 6.1% ABOVE their year ago level. Nondefense Capital Goods Shipments ROSE. Including civilian aircraft, they ROSE by 2.4% and excluding them they ROSE by 0.7% Durable manufacturing inventories ROSE by 0.6%. Nondefense capital goods shipments ex-aircraft, proxies for equipment and software investment, are sharply above their Q2 level, suggesting that capital spending will likely make a positive contribution to Q3 GDP growth.