Durable Goods Orders Show Unexpected Decrease In August

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Orders for goods meant to last for at least three years unexpectedly showed a notable decrease in the month of August, according to a report released by the Commerce Department on Friday, although the drop was largely due to a steep decline in orders for transportation equipment.

The report showed that orders for durable goods fell 2.4 percent in August following a revised 4.8 percent increase in July. The decrease surprised economists, who had expected orders to edge up 0.4 percent compared to the 5.1 percent increase that had been reported for the previous month.

A notable decrease in orders for transportation equipment contributed the unexpected drop in durable goods orders.

Orders for transportation equipment fell by 9.3 percent in August after surging up by 17.7 percent in July. The pullback was largely due to a steep drop in orders for aircraft and parts.

Excluding the decline in orders for transportation equipment, durable goods orders were nearly unchanged in August compared to a revised 0.9 percent increase in the previous month.

Notable increases in orders for primary metals and communications equipment were offset by a significant decrease in orders for computers and related products.

Commenting on the data, Peter Boockvar, equity strategist for Miller Tabak, said, "With final consumer demand still muted, business investment outside of refilling shelves remains sluggish."

"But those companies with large overseas exposure likely have more growth visibility than those that are more focused on the U.S.," he added.

The report also showed that shipments of durable goods fell by 1.4 percent in August following a 2.2 percent increase in July. Shipments of transportation equipment had the largest decrease, falling by 2.0 percent.

Inventories of durable goods fell for the eight consecutive month, falling by 1.3 percent in August following a 1.1 percent decrease in July.

The Commerce Department added that orders for non-defense capital goods, excluding aircraft, which is seen as a good indicator of business spending, edged down 0.4 percent in August after falling by 1.3 percent in the previous month.

Next Friday, the Commerce Department is scheduled to release its August report on factory orders, which include orders for durable goods as well as orders for non-durable goods.

Orders for goods meant to last for at least three years unexpectedly showed a notable decrease in the month of August, according to a report released by the Commerce Department on Friday, although the drop was largely due to a steep decline in orders for transportation equipment. (Market News Provided by RTTNews)