Durable Goods Not In Free Fall As Some Expected

The prior report for July was for a 1.9% increase, down from the preliminary report of a 2.0% gain.

Orders for durable goods in August fell for the first time in three months, mainly because of an expected pullback in bookings for new cars and airplanes. Excluding defense, another volatile sector, new orders fell by 1.0%.

Transportation equipment, also down following two consecutive monthly increases, led the decrease, $4.8 billion or 5.8% to $78.7 billion.

A stronger dollar increases prices of USA goods in foreign markets, whereas weakness in the world’s second biggest economy, China, also puts pressure on the global economy.

Economists are forecasting that growth in the current July-September quarter will slow slightly to around 2.5 percent, reflecting in part an effort by businesses to trim their stockpiles after a big rise in inventories in the spring.

Jim O’Sullivan, chief United States economist at High Frequency Economics, said the decline was consistent with other data that has shown tepid manufacturing activity.

New orders for durable goods were not all that durable in August. New orders for nondefense capital goods excluding aircraft, considered a proxy for business spending on equipment and software, fell by 0.2 per cent in August after increasing the two previous months. Neither this number nor the July revision should be enough to make any sizable changes to third-quarter estimates on gross domestic product. Civilian aircraft orders drove the decline, falling by 5.9%.

Durable goods orders are orders for items meant to last at least 3 years.

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. A survey of supply-chain executives conducted by the Institute for Supply Management found United States manufacturing expanded at a slower pace in August than July.