Durable Goods: Miss Mostly Offset By Stronger Revisions

Bottom Line: Durable goods orders fell in October. Although they have climbed at a 12.8% annualized rate in the last three months, this reflects sharp swings in aircraft orders. Looking at the past 12 months, hardgood orders have increased at a 1.0% annualized rate. While lower this month, capital goods orders ex-air and defense rose at a 12.5% annualized pace over the last 3 months, suggesting acceleration from the 10.3% and 8.1% annualized rates over the last 6- and 12-months, respectively. The October level of nondefense capital goods shipments ex-aircraft, proxies for equipment and software investment, is modestly above its Q3 level, suggesting that capital spending will have a positive Q4 impact on GDP growth. Durable Goods Orders FELL by 1.2% in October, compared with market expectations for an increase of 0.3%. Moreover, the prior month was revised lower from 2.2%to 2.2%. Transportation Orders FELL by 4.3% with civilian aircraft orders dropping by 18.6% while motor vehicle orders climbed by 1.7%. Ex-transportation orders ROSE by 0.4%. Core Durable Goods Orders, those excluding both civilian aircraft and defense, ROSE by 0.34% and are 6.5% ABOVE their year ago level. Nondefense Capital Goods Shipments FELL. Including civilian aircraft, they FELL by 1.9% and excluding them they ROSE by 0.4% Durable manufacturing inventories ROSE by 0.1%. The October level of nondefense capital goods shipments ex-aircraft, proxies for equipment and software investment, is modestly above its Q3 level, suggesting that capital spending will have a positive Q4 impact on GDP growth.