Durable Goods Orders Drop 2% in August

The Census Bureau said that new durable goods orders fell 2.0 percent in August, essentially offsetting the 1.9 percent increase seen in July.

The Commerce Department says that orders for durable goods fell 2 percent in August compared to July when orders had risen by 1.9 percent.

Durable goods orders were down for the first time in three months, as the strong dollar and lackluster global economy hurt demand for big-ticket items from the USA, particularly jets. Orders of non-defense capital goods declined 2.0 percent to $80.4 billion, and shipments grew 1.8 percent to $80.8 billion.

Overall shipments outside of transportation were flat for the month, yet this follows very strong gains in the prior two months. Despite being a major drag on new orders, transportation equipment drove the increase in inventories, rising by $900 million or 0.7% to $132.5 billion. Industrial production-a measure of output in the manufacturing, utilities and mining sectors-fell a seasonally adjusted 0.4% in August, according to a Federal Reserve report released earlier this month. For the most part, when the numbers are looked at more closely, durable goods orders have fallen for the last seven months overall.

“In general, manufacturing has been weaker than the rest of the economy recently, although the trend is probably close to flat rather than down sharply”, O’Sullivan said.

Some economists were optimistic that business spending could improve in the third quarter, after a slow start to the year.

“Investment in equipment appears to be recovering in the third quarter”, Ashworth said in a research note.

Durable Goods New Orders vs. Year Ago Detail Recession on the Way?

The Institute for Supply Management said that its manufacturing index slid to a reading of 51.1 in August, its lowest level since May 2013. These gains were counteracted, however, by decreased sales for fabricated metal products (down 1.8 percent), electrical equipment and appliances (down 0.6 percent) and computer and electronic products (down 0.2 percent).