US durable goods orders hold up in August

Orders for goods meant to last more than three years held up better than expected in August amid large increases in those for automobiles and defense aircraft, together with core orders for capital goods.

Durable goods orders were roughly unchanged month-on-month at $226.9bn, according to the US Department of Commerce.

Economists had penciled in a drop of 1.1% over the month.

Motor vehicles and parts orders increased 0.7% to $55.0bn, while those for defence aircraft jumped 24.2% to $5.46bn.

Excluding the transportation sector orders were 0.4% lower on the month (consensus: -0.5%) at $148.8bn and down by 1.0% if defence sector orders are taken out.

In comparison to July, orders for primary metals and fabricated metal products both declined by 0.5%, while those for electrical equipment dropped 2.5%.

Capital goods orders also weakened, slipping 1.0% to $78.8bn.

Nonetheless, orders for non-defence capital goods excluding those for aircraft - so-called 'core' capital goods orders - in fact grew by 0.6% to $63.3bn (consensus: 0.0%).

Steve Murphy, US economist at Capital Economics, described the details of the report as "weak", adding that the data now appeared to show that equipment investment shrank in the third quarter, pointing to downside risks for its estimate of third quarter gross domestic product growth of 2.5%.

Nevertheless, "with the drags from mining-related investment and net trade now fading, we still expect GDP growth to gradually pick up over the second half of the year. But that pick-up is going to be more modest that many were hoping for."

"The key development in recent months is the third straight gain in core capex orders, ex-defense and aircraft. [...] The key factor driving the turnaround is the rebound in activity in the oil sector, but note that the NFIB survey also points strongly to an upturn in orders for non-oil, non-residential capex too.

"In the light of the plunge in the ISM manufacturing index, these numbers are very comforting. Finally, note the second straight (small) increase in durable inventories; the first back-to-back gains since the spring of 2015," Ian Shepherdson, chief economist at Pantheon Macroeconomics pointed out.