US Q3 GDP tracking 1.0% after September durable goods orders

Durable goods orders fell 1.2% m/m in September, broadly in line with consensus expectations of a 1.5% decline. A sharp 35.7% m/m drop in nondefense aircraft orders subtracted 2.2pp from the headline reading. Excluding transportation, orders fell 0.4% m/m in September (forecast: 0.0%). A portion of that weakness came from an upward revision to durable goods orders ex transit in August, which are now estimated to have been unchanged on the month (initial: -0.2%).

Outside of this revision though, several categories of manufacturing orders continue to show sluggish demand. Orders for machinery (-1.3% m/m, previous: -1.0%), primary metals (-1.2% m/m, previous: -3.0%) and computers and electronics (-0.6% m/m, previous: -0.1%) all fell for the second consecutive month. One bright spot in the report was orders for motor vehicles and parts, which rose 1.8% m/m (previous: -2.0%) to reverse their August decline. Elsewhere, manufacturers' inventories of durable goods fell more than expected in September (-0.3% m/m) and were revised lower in August (-0.2% m/m, initial: 0.0%).

Stripping out many of the series that distort the headline figures on durable goods orders, readings on core capital goods through September continue to suggest headwinds for the US manufacturing sector. Core orders were down 0.3% m/m in September (forecast: +0.3%) and revised sharply lower in August (-1.6% m/m, initial: -0.8%). Shipments (+0.5% m/m), the actual data the BEA uses to estimate current investment in GDP, bounced back in September but were revised down to -0.8% m/m for August (initial: -0.4%).

"The September data, along with revisions to prior months, modestly trimmed our estimate of equipment investment in Q3. The sharper-than-expected decline in inventories suggests an even larger drag on Q3 GDP growth from the change in private inventories. On net, our Q3 GDP tracking estimate fell two-tenths to 1.0%", says Barclays.