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US durable goods orders decline for second consecutive month

H.S. Borji
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US durable goods orders decline for second consecutive month

US durable goods orders declined unexpectedly in September, falling at the fastest pace since January on lower demand for machinery and equipment.

Orders for manufactured goods meant to last three years or more declined 1.3 percent to $241.6 billion, following a slightly revised drop of 18.3 percent a month earlier, the Commerce Department reported today in Washington. Economists forecast an increase of 0.5 percent after two months of volatility that was triggered by an upswing in civilian aircraft orders.

Excluding the volatile transportation category, durable goods orders declined 0.2 percent, official data showed. That followed a gain of 0.4 percent in August. Economists forecast an increase of 0.5 percent.

Excluding defense equipment, new orders declined 1.5 percent.

Like in August, a decline in transportation orders was the biggest catalyst behind the drop. Orders for transportation equipment fell 3.7 percent to $73.4 billion.

Capital goods orders – a gauge of business spending that excludes defense and aerospace purchases – declined 1.7 percent from August, official data showed. Economists forecast capital goods orders to increase 0.7 percent.

Durable goods shipments edged up 0.1 percent to $245.6 billion, following a 1.8 percent decline a month earlier.

Unfilled orders for durable goods increased 0.3 percent to $1,168.7 billion.

Inventories of durable goods increased 0.4 percent to $404.8 billion.

September marked the second consecutive month durable goods orders had decreased, raising concerns companies were reluctant to invest in business equipment amid a shaky global environment. Weak recoveries in Europe, Japan and emerging economies prompted the International Monetary Fund to downgrade its outlook on the global economy in 2014 and 2015. The international lending institution announced earlier this month it expects the global economy to grow 3.3 percent this year and 3.8 percent in 2015, down from previous estimates of 3.4 percent and 4 percent, respectively.

A separate gauge of US manufacturing activity also suggests factory output was softening after a period of stronger growth. US manufacturing output fell in October to a three-month low, as new business growth eased to its lowest level since January, Markit Group reported last week.

Markit Group’s flash estimate of US manufacturing activity declined to 56.2 from 57.5.

Industrial output as a whole had rebounded sharply in September, official data revealed earlier this month. Industrial production rose in September at the fastest rate in nearly two years, following gains across the manufacturing, mining and utilities industries.

Industrial production increased 1 percent in September after dropping 0.2 percent in August, the Board of Governors of the Federal Reserve System reported earlier this month. Year-on-year, industrial output increased 4.3 percent.

On Thursday the Commerce Department will post an advance estimate of third quarter GDP. The US economy grew at an annual rate of 3 percent in the third quarter, the advance estimate is expected to show. A slowdown in factory output, especially in the manufacturing component, could result in weaker growth in the final quarter of 2014.

On average, the US economy is expected to grow 2 percent to 2.2 percent this year, according to the Federal Reserve.

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