September surprise: New orders for durable goods decline

New orders on durable goods decreased 1.3 percent in September 2014, surprising analysts who forecasted a .7 percent increase.
New orders for durable goods decreased 1.3 percent in September 2014, surprising analysts who had forecast a 0.7 percent increase.

By Ryan Sachetta

New orders for durable goods unexpectedly fell across a broad range of sectors in September, signaling caution on the economy as the Federal Reserve meets to set interest rate policy.

September orders for durable goods missed Bloomberg L.P.’s forecast of a 0.7 percent increase, dropping 1.3 percent, or $3.2 billion, according to advance figures released Tuesday by the U.S. Department of Commerce. It’s the second consecutive month that new orders have fallen.

Civilian aircraft, communications equipment and machinery experienced the most turbulence, including a 16.1 percent decrease in aircraft and new parts.

New orders for nondefense capital goods excluding planes fell 1.7 percent in September, prompting economist Diane Swonk, chief economist at Chicago-based Mesirow Financial, to call the numbers “not as encouraging as we had hoped, going into the fourth quarter” in a blog post.

Economists had expected a 0.7 percent rise for the key measure of business capital spending.

“The shortfall in durable goods orders is just one more reason for the Federal Reserve to remain cautious about when it intends to raise rates,” Swonk wrote.

In August, new orders for durable goods plummeted 18.3 percent, triggered by a 74 percent reduction in new orders for civilian planes and parts following a surge in orders for Boeing’s aircraft in July.

Economists at First Trust Portfolios, the Wheaton-based investment firm, released a research note Tuesday that told people not to fret. “An upward trend is still intact,” the First Trust note said, citing a 3.3 percent year-to-year percentage change in new orders.

New orders for primary metals heated up in September, pacing growth with a 2.2 percent increase.

September shipments of manufactured goods increased 0.1 percent to $245.6 billion with fabricated metals leading the growth with a 0.6 percent increase.

The durable goods report is a key barometer in gauging the health of domestic manufacturers, indicating new order and shipment figures for such long-term goods as airplanes, computers and lawnmowers.

On Thursday, the Commerce Department’s Bureau of Economic Analysis is scheduled to release its third quarter report on gross domestic product, which Mesirow Financial estimates at 3.2 percent as compared with the second quarter’s 4.6 percent.