New Orders for Durable Goods Declined 1.3% in September
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Implications: Don't fret much about the soft headlines on orders for durable goods in September. An upward trend is still intact. New orders for durable goods dropped 1.3% in September, falling for the second consecutive month. But once again the drop was led by the very volatile transportation sector which fell 3.7%, mainly due to a large decline in civilian aircraft orders. This kind of monthly volatility is why it's important to look at the trend, which remains upward. Orders for durables are still up a Plow Horse-like 3.3% from a year ago and up 7.3% excluding the transportation sector. Meanwhile, shipments of "core" capital goods, which exclude defense and aircraft – a good proxy for business equipment investment – declined 0.2% in September. Still, these "core" shipments are up 7.1% versus a year ago, and were up 11.1% at an annualized rate in Q3 versus the Q2 average. As a result, it still looks like business investment in equipment grew at about a 14% annual rate in Q3 and real GDP (for which we will get the first reading on Thursday) grew at close to a 3% rate. In other manufacturing news this morning, the Richmond Fed index, a measure of factory sentiment in the mid-Atlantic region, boomed to +20 in October from +14 in September, the best reading since December 2010. This signals continued gains in industrial production in October. On the housing front, pending home sales, which are contracts on existing homes, increased 0.3% in September, and are up 3% from a year ago. Meanwhile, the national Case-Shiller home price index increased 0.4% in August and is up 5.1% from a year ago. Price gains in the past year have been led by Miami, Las Vegas, and San Francisco. The three cities with the slowest gains in the past year have been Cleveland, Charlotte, and Chicago. We expect home prices to continue to rise in the year ahead but at a slower pace than the past couple of years.

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Posted on Tuesday, October 28, 2014 @ 11:14 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.