A report released by the Commerce Department on Wednesday showed a much steeper than expected drop in new orders for U.S. durable goods in the month of October, with the sharp decline largely reflecting a substantial decrease in orders for transportation equipment.
The Commerce Department said durable goods orders plunged by 4.4 percent in October following a revised 0.1 percent dip in September.
Economists had expected orders to slump by 2.5 percent compared to the 0.7 percent increase that had been reported for the previous month. The steep drop in durable goods orders was primarily due to the sharp pullback in orders for transportation equipment, which tumbled by 12.2 percent in October after climbing by 0.9 percent in September. Orders for non-defense aircraft and parts plummeted by 21.4 percent in October after plunging by 19.3 percent in September, while orders for defense aircraft and parts nosedived by 59.3 percent after soaring by 117.1 percent. Excluding the substantial decrease in orders for transportation equipment, durable goods orders inched up by 0.1 percent in October after a revised 0.6 percent decrease in September. Ex-transportation orders had been expected to rise by 0.4 percent compared to the 0.1 percent uptick originally reported for the previous month.
The uptick in ex-transportation orders came as notable increases in orders for electrical equipment, appliances and components and computers and electronic products were partly offset by a significant decline in orders for primary metals. The report also said orders for non-defense capital goods excluding aircraft, a key indicator of business spending, were nearly unchanged in October after falling by 0.5 percent in September. Shipments in that category rose by 0.3 percent in October, barely reversing the drop seen over the two previous months.”This report is another piece of evidence that suggests the sharp rise in interest rates is beginning to restrain economic growth,” said Michael Pearce, Senior U.S. Economist at Capital Economics. He added, “The weakness of business investment is particularly disappointing because it should have been boosted by the tax changes at the beginning of the year.” The Commerce Department also said shipments of durable goods fell by 0.6 percent in October after jumping by 1.0 percen