Nominal Durable Goods Orders Posted A Strong, Broad-Based Gain In October

By Robert Hughes

New orders for durable goods rose 1.0 percent in October, following a 0.3 percent gain in September. Total durable goods orders are up 11.5 percent from a year ago. The October increase puts the level of total durable goods orders at $277.4 billion, the second-highest on record (see top of first chart).

New orders for nondefense capital goods excluding aircraft, or core capital goods, a proxy for business equipment investment, rose 0.7 percent in October after decreasing 0.8 percent in September. Orders are up 7.9 percent from a year ago, with the level at $75.3 billion.

However, price increases have had an impact on capital goods orders. In real terms, after adjusting for inflation, real new orders for durable goods increased by 0.8 percent in October, following a 0.1 percent gain in September. Real new orders for nondefense capital goods – one of AIER’s leading indicators – gained 1.2 percent after a 3.4 percent jump in September (see bottom of first chart). Real new orders for capital goods are up 7.5 percent from a year ago but remain below the January 2022 level.

All but one of the seven major categories shown in the durable goods report posted a gain in October in nominal terms. Transportation equipment jumped 2.1 percent, its third consecutive gain (see second chart). Within the transportation equipment category, nondefense aircraft rose 7.4 percent following a 23.4 percent surge in September, defense aircraft jumped 21.7 percent following a 32.6 percent drop, and motor vehicles and parts were up 0.6 percent following a 2.4 percent gain in September.

Among the other individual categories, machinery orders gained 1.5 percent, electrical equipment and appliances, and computers and electronic products had 0.4 percent increases, the all other durables category rose 0.2 percent, and fabricated metals orders added 0.1 percent. The primary metals orders category was the lone decliner, falling 0.1 percent. Durable goods orders have posted a strong recovery from the lockdown recession, measured in nominal dollars. However, after adjusting for price increases, real orders for durable goods are rising at a more modest trend growth rate in recent months.

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