US durable goods orders slump in November amid declines for defence

Orders in the US for goods made to last more than three years surprised sharply to the downside last month, amid a big drop in demand for military aircraft.

According to the Department of Commerce, in seasonally adjusted terms, durable goods orders in the States shrank at a month-on-month pace of 2.0% in November to reach $242.63bn (consensus: 1.5%).

The chief cause for the shortfall was a 72.7% decline in orders for defence aircraft and parts to $1.94bn.

Excluding defence on the other hand, orders rose by 0.8% versus October, and if orders for all transportation equipment were excluded then they were flat (consensus: 0.2%).

Orders for machinery also registered a large drop, falling by 1.6% on the month to $32.42bn.

A ket lead indicator for trends in business investment, orders for so-called 'core' durable goods, which excludes both defence items and civilian aircraft, edged up by 0.1% on the month.

In comparison to the year earlier level, core durable goods orders advanced by 0.7%.

Commenting on Monday's figures, Paul Ashworth, chief US economist at Capital Economics, said: "In short, it's not a disaster, but business equipment investment was still close to stagnant."

"Finally, the durables inventory-to-shipment ratio edged higher again in November, but the rise this year is almost entirely due to Boeing’s build-up of 737 inventory. Excluding aircraft, the durables inventory-to-shipments ratio remains well within historical norms."