November 22, 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 decreased 1.2% in October to 236.0 billion, well below expectations of a 0.4% increase after September’s revision to 238.8 billion. New orders are up 1.0% year-over-year. Taking out the 33% decline in commercial aircrafts this month, ex-transportation orders came in at a 0.4% increase. Core capital goods decreased 0.5% in October despite expectations of a 0.5% increase.
October’s durable goods orders were dragged down by volatile aircraft orders. The reason behind the volatile movements is the aircraft orders are placed all at once instead of individually. Companies might schedule orders for new aircrafts for the next 10 years instead of ordering them month by month when they are needed. Holding up durable goods orders were slight increases in machinery orders, shipments, and vehicle orders. Whenever there is an extremely volatile component of an economic data point, it is important to look at the data minus any volatile factors. In this case, after all transportation was taken out, orders showed an increase this month.