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US durable goods orders ease off record high in August

H.S. Borji
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US durable goods orders ease off record high in August

US durable goods orders declined sharply in August, easing off the previous month’s record high that resulted from a surge in demand for civilian aircraft.

Orders for manufactured goods meant to last three years or more declined 18.2 percent to $245.4 billion, following a revised gain of 22.5 percent in July, the Commerce Department reported today in Washington. July had witnessed the highest level of durable goods orders since record keeping first began under the current North American Industry Classification System in 1992.

A median estimate of economists called for a decline of 18 percent.

A decline in transportation orders was the biggest catalyst behind the drop. Orders for transportation equipment declined 42 percent to $76.8 billion, following two consecutive monthly increase.

Demand for Boeing jetliners drove transportation sales in July, as the aircraft manufacturer took 324 orders that month, the highest on record and more than triple the rate of July 2013 orders.

Non-defense capital goods excluding aircraft – a gauge of business spending – rose 0.6 percent in August.

Excluding the volatile transportation equipment category, durable goods orders increased 0.7 percent.

Excluding defense equipment, orders tumbled 19 percent.

Shipments of manufactured durables decreased 1.5 percent to $246.1 billion, following two consecutive monthly increases.

Unfilled orders for US durables, up 16 of the last 17 months, increased 0.6 percent to $1,165 billion, the highest level since the series was first published on a NAICS basis.

Nondefense capital goods orders declined 36.3 percent to $86.8 billion, official data showed.

Durable goods inventories increased 0.4 percent in August, another record high under the current data collection regime. Stronger inventory growth was partly responsible for stronger second quarter GDP growth, and the latest figures suggest manufacturers were accumulating stockpiles at a steady rate in the third quarter.

The Commerce Department is scheduled to release revised second quarter GDP estimates on Friday. The US economy grew 4.5 percent annually in the second quarter, the revised figures are expected to show.

The advance estimate of third quarter growth is scheduled for release on October 30.

The manufacturing sector has been a catalyst of economic growth in the second half of the year. Manufacturing activity climbed in August, as 17 of the 18 major sub-sectors reported growth, the Institute for Supply Management reported earlier this month. The gauge of national manufacturing activity rose 1.9 percentage points to 59, beating estimates.

Manufacturing activity remained elevated in September, as an increase in output and new orders contributed to the fastest pace of job growth in two-and-a-half years, Markit Group reported earlier this week.

The market research firm’s flash estimate of US manufacturing activity was relatively unchanged in September at 57.9.

On balance, however, recent indicators about the US manufacturing sector have been mixed. According to the Board of Governors of the Federal Reserve System, industrial production declined 0.1 percent in August following a modest gain of 0.2 percent. The manufacturing sector, which accounts for three-quarters of total industrial output, declined 0.4 percent in August, following a 0.7 percent gain the previous month.

Year-on-year, manufacturing output was up 3.6 percent, official data showed.

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