October 25, 2017 – Durable goods orders, which are orders to buy products that are expected to last at least three years, indicates how busy factories will be in the near future. As the name suggests, durable orders provide a look into demand for equipment along with other big-ticket purchases, such as vehicles and appliances. An increase in capital spending and consumer purchases indicates an increase in business investment and personal consumption in GDP.
New orders for durable goods increased 2.2% in September to 238.7 billion, well above expectations of a 1.0% change after August’s revision to 233.6 billion. New orders are up 8.3% year-over-year. After taking out the increase of 64% in commercial aircraft orders, orders experienced a 0.7% increase. Core capital goods increased 1.3% in September despite expectations of a 0.5% increase.
High durable goods orders point to an increase in business investment. Elevated business investment leads to higher economic growth. Transportation made up a large part of new orders with an increase of 5.1% from last month. Taking out transportation, machinery orders were up 7%, primary metals orders were up 12.5%, and computers & electronic product orders also increased 1.6%. Increases in durable goods orders tend to provide a good indication for industrial production and manufacturing readings in the month to come.