U.S. Durable Goods Orders Unexpectedly Drop Amid Slump In Aircraft Demand

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Reflecting another steep drop in orders for transportation equipment, the Commerce Department released a report on Wednesday showing an unexpected decrease in new orders for U.S. manufactured durable goods in the month of October.

The report said durable goods orders fell by 0.5 percent in October following a 0.4 percent drop in September. The decrease surprised economists, who had expected durable goods orders to rise by 0.2 percent.

The unexpected dip in durable goods orders came as orders for transportation equipment slumped by 2.6 percent in October after tumbling by 2.8 percent in September.

Orders for aircraft and parts led the way lower, with orders for commercial aircraft and parts plunging by 14.5 percent and orders for defense aircraft and parts plummeting by 21.8 percent.

Excluding the continued decline in orders for transportation equipment, durable goods orders rose by 0.5 percent in October after climbing by 0.7 percent in September. The increase matched economist estimates.

The continued advance by ex-transportation orders partly reflected notable increases in orders for primary metals and electrical equipment, appliances and components.

The report also said orders for non-defense capital goods excluding aircraft, a key indicator of business spending, increased by 0.6 in October after jumping by 1.3 percent in September.

Shipments in the same category, which is the source data for equipment investment in GDP, rose by 0.3 percent in October after surging by 1.3 percent in the previous month.

Chris Low, Chief Economist at FHN Financial, said the uptick in shipments is "unlikely to be enough to overcome inflation, meaning a negative contribution to GDP in the first month of the quarter."

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