U.S. durable goods recover strongly in August

U.S. durable goods recovers strongly in August. The headline durable goods orders rose 4.2 percent sequentially in the month, recovering from a 1.2 percent sequential fall in the prior month. The recovery in August was stronger than the consensus expectations of a rise of 2 percent. The huge recovery was mainly due to swings in the transportation category, which rose 13 percent sequentially after a 3.7 percent fall in July.

The swing in transportation orders was driven totally by the greatly volatile nondefense aircraft, with motor vehicles and parts working in the opposite direction. Stripping transportation, new goods orders rose 0.1 percent sequentially, down from a 0.3 percent rise in July. Smoothing through the monthly volatility, the underlying trend in the ex-transportation category seems to be slowing down, with orders rising 1.9 percent.

Monthly patterns in the capital goods categories were similar, with underlying trends staying in line with strong rises in business investment, noted Barclays in a research report. Headline capital goods orders rose 12.3 percent sequentially after a 4.1 percent fall in July, with the swing driven by the aforementioned movements in the nondefense aircraft category.

Stripping defense and aircraft, new orders dropped 0.5 percent sequentially after a 1.5 percent rise in July. In spite of July’s fall, the underlying trend of orders in the core capital goods category continues to be very solid, with orders rising 11.4 percent on a three-month-on-three-month basis, as compared with consensus expectations of 0.4 percent.

Nondefense capital goods shipments excluding aircraft decelerated to a 0.1 percent sequential rise in August after July’s 1.1 percent rise. Core capital goods shipments rose 8.9 percent on a three-month-on-three-month basis, as compared with the rise on the same basis over the preceding three-month period.

At 18:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 112.179. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex