Durables doubled expectations in September

October 26, 2023

September durable goods orders jumped 4.7%, surpassing expectations for a 1.9% increase. A huge upswing in aircraft orders contributed to the gain. Excluding the impact of plane orders, durable goods rose 0.5%, still a solid increase and the firmest reading in four months.

Transportation orders rose 12.7% in September, propelled higher by a 92.5% increase in civilian aircraft orders. In September, Boeing booked 224 new aircraft orders, nearly six times the number of planes booked in August. That largely offset weak motor vehicles and parts orders, -1%, owing to the ongoing UAW strike, which has expanded to additional plants.

Investment associated with the Inflation Reduction Act continues to benefit those producers tied to the construction industry for chip fabrication plants, electric vehicle factories and others. Spending on chip plant production is three times higher than a year ago. Electrical equipment, machinery and fabricated metals orders each rose 0.9% in September.

Orders for computers and electronic equipment rose 1%, boosted by a 5.2% rise in communication equipment orders, the second month in a row of a 5% or more gain. The newly, expanding supply chains will need to talk to each other for just-in-time inventory management, which is more relevant now given the higher inflation and higher insurance costs that eroded manufacturers’ operating profits over the last few years.

According to the Census Bureau, it is the manufacturing sector, not online shopping, that ranks number one in E-Commerce. Manufacturing e-commerce revenue comprised 67%, or near $4 trillion of the $6 trillion in total value of manufacturing revenue. In contrast, retail e-commerce sales were 9.9%, or $520 billion of the $5.3 trillion in total retail sales.

The Census Bureau reported that the automobile industry is a prime example. E-commerce can take place over the internet but also includes sales made using extranets, Electronic Data Interchange (EDI) networks, email or other online systems. To make this process efficient, the assembly plant maintains an EDI with parts that suppliers can order exactly when they are needed.

Core orders, a gauge of future business investment, rose 0.6%, beating expectations for no change. That follows an upwardly revised 1.1% rise in August from 0.9%. Additionally, S&P Global manufacturing new orders climbed into expansionary territory in September, registering 51.0, which is the highest reading since last September. Although overall business investment moved sideways in the just-released third quarter GDP report, the forward-looking orders data point to a potentially better outcome for capital spending in the fourth quarter.