Durable Goods Orders Fell 2 Percent in August

Excluding transportation, durable goods orders were unchanged in August as expected.

Durable goods orders fell 2.0 percent to a seasonally adjusted $236.3 billion, said data from the Commerce Department, a decline in line with analyst expectations. The August decrease followed a 1.9 percent July increase. The most core component, non-defense capital goods excluding aircraft, showed a slightly drop over the prior month and the historical performance can be seen in the chart below.

For August, demand for commercial aircraft fell for a second month, dropping 5.9 per cent after an 8.7 per cent decline in July.

Setting aside autos and aircraft, new orders for long-lasting USA goods were flat. On a year-over-year basis, new orders have fallen 2.3 percent, highlighting the challenges faced by manufacturers over the past 12 months and the soft US and global economic environment that have existed over much of that time. Bookings rose 4.9 percent in July.

A key measure of business investment, meanwhile, also fell for the first time in three months. Shipments of non-military capital goods excluding aircraft, which are used to calculate gross domestic product, decreased 0.2 percent in August after rising 0.5 percent the month before. On balance, the trend in core capital goods orders and shipments suggests demand for United States manufacturing remains sluggish but stable.

Paul Ashworth, chief USA economist for Capital Economics, said the small 0.2 per cent setback in the business investment category had been expected given the strong gains in this area in the previous two months. Earlier in 2015 companies scaled back investment because of a stronger dollar that’s reduced exports.

Looking ahead, several recent surveys of executives suggest investment could wane because of worries about the global economy. And now the threat of another USA government shutdown is also clouding the outlook. Shipments for motor vehicles were down about 1.6% in August following July’s 4.7% surge when auto sales were at a new peak. Factories showed no change in inventory levels for the month, and managed to work off backlog orders by about 0.2% – like orders and shipments.