Orders for durable goods climbed higher in November

December 22, 2023

Durable goods orders surged 5.4% in November, beating expectations for a 2.3% increase and following a 5.1% drop for orders in October. November’s outcome was the largest gain since COVID when orders rose 9.8% in July 2020. The swing in orders over the last two months was predominantly due to aircraft. Excluding transportation, orders still rose a solid 0.5% in November.

Transportation orders rose 15.3% in November, owing to strength in civilian aircraft orders, up 80%, and motor vehicles and parts, up 2.8%. Plane orders received a boost from the recently concluded Dubai Air Show that took place in mid-November. Orders for motor vehicles saw their first increase after two months of decline as factory production slowly ramped up following the conclusion of the UAW strike.

Orders for computers and related products rose 3% and up 12% on an annualized basis. We can thank generative AI for the solid order demand. Communications equipment rose 1.1% in November.

Fabricated metals orders were unchanged in November, taking a brief respite after showing strong gains earlier this year. These orders have benefitted from the boom in construction for manufacturing plants and the rebuilding of our aging highways, bridges and railways. Sales of electric vehicles have been falling short of targets. A near-term course correction is taking place among the Detroit Big Three as production schedules are adjusted to the new reality. The price of a fully EV pickup truck, which has drawn the largest investment, remains out of reach for widescale adoption. Other factors include range anxiety, limited towing capacity and charging networks that do not work for all vehicles.

Defense orders plummeted 12% after rising 23.5% in October, continuing their monthly volatility.

Core orders, which represent capital goods orders excluding defense and aircraft, and are a proxy for future business spending, surged 0.8% to a new record level, which follows a revised -0.6% in October.

Core shipments, an input into the calculation of GDP, declined 0.1% in November. That was below expectations for no change and follows a downwardly revised -0.1% in October. Those results imply weaker equipment spending in the fourth quarter, which lowers our tracking estimate for GDP growth to 0.8% from 1.0%.