October 2017 Durable Goods Orders

Orders for wares expected to last three years or longer fell in October according to the Census Bureau.  After jumping 2.2 percent in September, Durable Goods Orders gave back over half of the prior month’s gain, falling 1.2 percent.  This monthly setback put downward pressure on the annual trend which dropped to just 1.0 percent versus the upwardly revised count of 8.4 percent (originally 8.3 percent) in September.  October’s sharp decline of $2.8 billion followed two solid monthly gains, so there may not be cause for alarm just yet.

Core orders followed a pattern similar to the headline.  After two strong gains of 1.4 percent and 2.1 percent during August and September respectively, orders for nondefense capital goods excluding aircraft declined 0.5 percent in October.  Atlas pays attention to this portion of the release because it provides some insight into how confident firms feel.  While a monthly setback is not optimal, the year-over-year trend remains healthy with a 4.4 percent gain.  This segment of the report is sensitive to the contours of the business cycle, so directional changes in its tendency are important.  Atlas will continue paying close attention to the monthly figures and annual trend in the months ahead, looking for signs of additional strength or new evidence of weakness. 

Many of the indicators Atlas watches demonstrate economic strength.  We recently wrote about the health of the Chicago Fed National Activity Index and Industrial Production from the Federal Reserve in Washington D.C., both coincident indicators.  Additionally, the Conference Board’s Leading Economic Index remains optimistic.  Most evidence suggests the current expansion is not ending in the immediate future.  While the latest Durable Goods Orders were not strong, this release is not potent enough to overwhelm the positive tone resonating through many of the data points Atlas watches each month.