In November 2023, US durable goods orders experienced a notable decline, more significant than anticipated, primarily due to transportation equipment, according to data released on Monday. Orders for tangible items possessing an average lifespan of at least three years fell by 1.1% month-over-month, totaling approximately $285.1 billion, as reported by the Census Bureau.
This drop was considerably under the consensus estimate, which predicted a lesser decline of 0.3%. In the previous month, October, orders had seen an uptick of 0.8%.Delving deeper, new orders in the transportation equipment sector saw a significant decrease of 2.9%, amounting to $95.5 billion in November.
Further breakdown reveals that nondefense aircraft and parts experienced a substantial drop of 7%, while the defense segment also faced a decrease of 2.6%. Additionally, motor vehicles and parts recorded a slight decline of 0.3%. It’s noteworthy that in October, both the defense and nondefense categories had reported impressive gains, soaring by approximately 19% and 16%, respectively.Government data also indicated a 0.6% decrease in new orders for nondefense capital goods, bringing the total to $87.09 billion for the month.
Shipments in this sector also fell by 0.8%. However, when excluding aircraft orders, new orders surprisingly increased by 0.7%, with shipments showing a modest advance of 0.5%.Oxford Economics' Deputy Chief Economist, Michael Pearce, provided insights into these fluctuations, attributing the more significant-than-expected decline in the headline durable goods orders primarily to erratic aircraft orders.
He emphasized that underlying capital goods orders and shipments actually performed better than anticipated, hinting at a potential positive trend ahead. Pearce projected that business equipment spending growth is likely to 'accelerate gently' in 2025, despite current challenges.Detailed analysis showed that defense capital goods orders encountered a notable decline of 12.5%, totaling $15.34 billion in November, alongside a corresponding downturn in shipments of 0.8%.
Excluding the transportation sector, the headline new orders recorded a marginal decline of 0.1%, contrasting sharply with Wall Street’s expectations of a 0.3% gain.In terms of manufactured durable goods, shipments dipped by 0.1% to $285.12 billion in November, following a slightly higher 0.5% drop in the prior month.
The data further revealed that inventories hit $529.81 billion last month, a modest increase from $527.88 billion in October.While caveats remain concerning investment in aircraft – particularly due to recent production delays tied to the Boeing strike – there is some optimism regarding the underlying orders data, which suggest a promising outlook for 2025.
As noted by Pearce, the anticipated downturn in aircraft investment is expected to exert a significant influence on the fourth quarter's performance..