Durable goods orders tick down, shipments rise modestly

Durable goods orders tick down, shipments rise modestly

* U.S. durable goods orders ticked down 0.4% m/m in September from a downwardly revised 1.3% increase in August, the first contraction after four consecutive monthly increases (Chart 1). The fall in headline durable goods orders reflects the 2.9% drop in motor vehicle and parts orders and the $4.2 billion decline in orders of nondefense aircraft and parts. Durable goods orders excluding transportation increased 0.4%, the seventh consecutive monthly increase, pointing to the strength of product demand through the economy’s reopening spurt.

* Shipments of nondefense capital goods – a proxy for business equipment investment in GDP – increased a healthy 1.9% lifting its yr/yr increase to 15.1% and its six-month annualized increase to 14.2% (Chart 2).

* Seven of the nine primary categories of durable goods shipments increased in September, with declines concentrated in industries adversely impacted by the ongoing semiconductor shortage: computers and related products (-0.2% m/m) and motor vehicles and parts (-2.3% m/m) (Chart 3). Ongoing supply constraints and persistence of the semiconductor supply disruption will likely constrain production well into next year.

* Despite the rise in shipments, which partly reflects strong product demand, supply bottlenecks and shortages continue to constrain production and distribution. Unfilled orders increased 0.7% in September, their eighth consecutive monthly increase, lifting the yr/yr increase to 4.7% (Chart 4).

* Orders of non-defense capital goods excluding aircraft, a gauge of underlying demand for durable goods increased 0.8%, its eighth consecutive monthly increase lifting it 18.5% above its level in January 2020, as manufacturers facing strong product demand seek to expand production (Chart 5).

Chart 1: Durable goods orders

Chart 2: Shipments of non-defense capital goods

Chart 3: Shipments of motor vehicles & parts and computers & related products

Chart 4: Unfilled orders: durable goods vs. durable goods ex. transportation

Chart 5: New orders of nondefense capital goods ex. aircraft

Mickey Levy, mickey.levy@berenberg-us.com

Mahmoud Abu Ghzalah, mahmoud.abughzalah@berenberg-us.com

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