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Durable Goods Orders Rise, Business Investment Disappoints

Posted by Joseph Trevisani on Oct 25, 2013 10:37:00 AM

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Orders for durable goods in September climbed the most in three months but the increase was entirely due to a surge in civilian and military aircraft. Outside of the transportation sector orders unexpectedly fell and business investment declined for the second time in three months.

New orders for manufactured goods designed to last more than three years rose 3.7 percent in September, reported the Commerce Department today, better than the 2.3% forecast by economists and the revised 0.2 percent gain in August. Over the year orders were 9.2 percent higher, slightly less than August's 9.5 percent increase.

Excluding the volatile aircraft industry new bookings in September fell 0.1 percent. Analysts had predicted a 0.5 gain. August's activity was revised down to -0.4 percent from -0.1 percent.

Placements for commercial aircraft surged 57.5 percent in September following a 5.4 percent gain in August. Boeing Company of Chicago listed 127 new aircraft orders in September, up from 16 the month before.  Orders for military aircraft and parts gained 15.2 percent on the month after an 11.5 percent decrease in August.

Capital goods orders excluding the defense sector and aircraft, often used as proxy for business investment, dropped 1.1 percent in September more than reversing the 1.0 percent forecast.  August’s orders were revised down by two-thirds to 0.4 percent from 1.5 percent.  Analysts speculate that companies may have held off on new investment and purchases in September knowing that a government shutdown or even default was a possibility the following month.

On the year these orders were up 8.0 percent in September after a 5.8 percent gain in August.  It was the best performance since a 16.4 percent rise in February 2012.

Sales of automobiles and light trucks ran at a 15.2 million annualized rate in September, just off August's pace which was the best since 2007.

Shipments of non-defense capital goods excluding aircraft unexpectedly fell 0.2 percent in September, well below the 1.1 percent estimate. The August increase was downgraded to 1.1 percent from 1.3 percent. 

These so-called "core" shipments enter into the government’s calculation of economic growth.  They have fallen in two out of three months in third quarters.  Annualized GDP for the third quarter is estimated at 1.8 percent and will be reported on November 7th.

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

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