US Q3 GDP tracking 2.2% after August durable goods report

Durable goods orders fell 2.0% m/m in August (previous: +1.9%), less than forecast(-3.5%) and the consensus (-2.3%), as a dip in orders for several categories of transportation equipment depressed what was otherwise relatively stable demand for manufactured durable goods. Excluding transportation, durable goods orders were unchanged in August as expected. Orders for motor vehicles and parts declined 1.7% m/m (previous: +4.9%) as the boost from a shorter-than-usual auto retooling season in July was unwound; this decline was smaller than what had been expected.

The volatile series for nondefense aircraft orders registered a 5.9% drop (previous: -8.7%) on the month. Other transportation equipment, for which we do not receive line item detail until the full M3 factory orders report, dropped 34% m/m after surging 65% higher the prior month. This aggregate includes railcar manufacturing and shipbuilding and often shows volatile swings, as was the case in August. Stripping out this volatility, core capital goods orders fell 0.2% m/m in August (forecast: -0.5%) on payback from the 2.1% jump in July.

Shipments of core capital goods declined 0.2% m/m as well, a bit less than what had been expected. Elsewhere, manufacturers' inventories of durable goods were unchanged in August and revised lower in July (-0.2% m/m, initial: -0.1% m/m). On balance, the trend in core capital goods orders and shipments suggests demand for US manufacturing remains sluggish but stable. This trend is expected to continue overall for the next few quarters.

"The smaller-than-expected declines for core capital goods orders and shipments in August suggest a bit more equipment investment in Q3 than we had previously expected. The downward revision to inventories in July and flat reading for August suggest an even sharper drag on GDP growth from private inventory investment in Q3 than had been tracking ahead of the report. This larger anticipated drag from inventories offset the boost from better equipment investment. On net, our Q3 GDP tracking estimate fell one-tenth to 2.2%", says Barclays.