New Orders for Durable Goods Fell 18.2% in August
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Implications: What goes up must come down, least when it's orders for durable goods. Orders for durables skyrocketed in July, both literally and figuratively, with a massive increase in Boeing plane orders that generated the largest gain on record for durables going back to 1958. A spike in Boeing orders is obviously not going to happen every month and so a return to a normal level of plane orders in August meant overall durable orders had to fall back to earth as well. This kind of monthly volatility is why it's important to look at the trend, which is clearly upward. Orders for durables are up 8.9% from a year ago and up 7.3% excluding the transportation sector, a new record high for non-transportation. Meanwhile, shipments of "core" capital goods, which exclude defense and aircraft – a good proxy for business equipment investment – rose 0.1% in August and were upwardly revised in July. These "core" shipments are up 6.6% versus a year ago, up an annualized 10.3% in the past six months and 12.7% rate in the past three months - a clear sign of acceleration. As a result, it now looks like business investment in equipment is growing at about a 14% annual rate in Q3 and real GDP grew at roughly a 3% rate. The Richmond Fed index, a measure of mid-Atlantic manufacturing sentiment, increased to 14 in September from 12 in August, which backs up the national data. In other news this morning, new claims for unemployment insurance increased 12,000 last week to a still low 293,000. Continuing claims rose 7,000 to 2.44 million. Plugging these figures into our payroll models suggests a gain of about 220,000 in September, both nonfarm and private. This is better than the consensus forecast, which, spooked by last month's tepid report, is around 200,000.

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Posted on Thursday, September 25, 2014 @ 1:30 PM

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