The struggles of the U.S. manufacturing sector were on clear display in the Commerce Department’s report on durable goods orders in September.
Orders for durable goods, those expected to last three years or more, fell in September, the Commerce Department said Thursday. Orders fell 1.1 percent last month, the first monthly decline since May and April.
Compared with a year ago, orders are down 5.6 percent, the worst drop off since the summer of 2016.
Transportation orders can be volatile month-to-month so many economists strip this category out for a clearer look at sector. Excluding transportation, orders were down a smaller 0.3 percent.
It is likely that the ongoing grounding of Boeing’s 737 Max and the strike by General Motors workers exacerbated the big decline in transportation orders. Commercial plane orders were down 12 percent. New autos and parts orders fell 1.6 percent.
Defense orders can also be lumpy, exaggerating the ups and downs of the manufacturing sector. Excluding defense, orders were down 1.2 percent.
Orders of metals were up 1.5 percent. Fabricated metal product orders, however, declined. Machinery orders rose 0.2 percent, a welcome respite from the declines in the previous two months.
Orders for so-called “core goods,” seen as a proxy for business investment because the category excludes both aircraft and defense orders, fell for the second month in a row. This highlights the widely reported decline in business investment, which is becoming a drag on the economy. There may be some evidence in the data from the very strong 6.4 percent growth in this category back in July.
Shipments for core capital goods fell 0.7 percent in September following a flat August and a 0.7 percent decline in July. These results will factor into third-quarter economic growth, reducing the gauge for nonresidential investment. It is likely that they will give new ammunition to those on the Federal Reserve seeking another cut at the next week’s meeting.
“After this morning’s advance durable manufacturing report from the U.S. Census Bureau, this morning’s new home sales and construction costs from the U.S. Census Bureau, and the National Association of Realtors’ existing-home sales release on Monday, the nowcast of real gross private domestic investment growth decreased from 0.3 percent to 0.0 percent,” the Atlanta Fed said Thursday.
The Atlanta Fed’s GDPNOW model, which aims to measure economic growth based on the latest data, was unchanged at 1.8 percent despite the disappointing durable goods figures.
Orders for computers fell 0.9 percent while orders for phones and other communications equipment jumped 1.4 percent. In the prior two months, communications orders had declined. This might be evidence of the “iPhone effect,” where consumers and businesses hold off on purchases in the summer months prior to the release of Apple’s latest models.
A slight silver lining to the otherwise dim report: August’s overall new orders figure was revised up from 0.2 percent growth to 0.3 percent growth.