Drop in durable goods overstates weakness

January 2, 2025

Durable goods orders in November fell -1.1%, missing the consensus forecast of -0.3%. October orders were revised up from 0.3% to 0.8%. Soft aircraft orders were the primary culprit for the weakness.

Transportation and equipment orders were a drag on overall orders, falling 2.9%. Every category was weaker month-over-month. Civilian aircraft orders plummeted in October, falling -7% from 16.4% in October. That parallels the decline in Boeing aircraft orders during the month. Defense aircraft orders slipped -2.6% following a strong 19.1% in the prior month. Orders for motor vehicles and parts continued declines that started in October. Excluding transportation, durable goods orders edged lower -0.1% after four months of increases.

Other sectors had mixed results. Coming off a weak October, computers and related product orders bounced back 1.4%, while communications equipment and electrical equipment, appliances and components was flat. However, this was not enough to keep broader computers and electronic products orders out of the red. Fabricated metals had its biggest decline in orders since January 2022, as it fell for the first time in six months.

Capital goods orders excluding defense and aircraft, a proxy for business spending plans, rose 0.7% in November. That is the largest gain in 15 months. This may be due to ordering ahead of anticipated price hikes.

A proxy for nonresidential investment, nondefense capital goods shipments excluding aircraft, rose 0.5% in November after increasing 0.4% in October. Durable goods inventories climbed 0.4% following a flat October.

The S&P Global purchasing managers' index (PMI) remained flat in December to 48.3. Readings below 50 signal contractionary conditions. This is the sixth straight month of readings below 50.