U.S. factory orders perform better than expected in October, equipment investment likely higher in Q4

U.S. factory orders dropped less than anticipated in the month of October, while the data for the prior month was upwardly revised. Orders dropped modestly by 0.1 percent sequentially, as compared with consensus expectation of a decline of 0.4 percent. September’s data was upwardly revised from 1.4 percent. A stronger retraction in October was expected to be driven by a correction in capital goods orders following the sharp rise in the prior month, noted Barclays in a research report.

But factory orders held up relatively well given considering recent gains, while capital goods orders dropped by a similar amount than expected. Meanwhile, shipments also came in strong, growing 0.6 percent sequentially and recording the sixth straight positive print.

The factory orders report for the month of October was better than expected, and along with upward revisions to core durable goods orders and shipments for September, suggests increased equipment investment in the fourth quarter than was factored in earlier, stated Barclays. Moreover, auto and truck sales in November were better than what was anticipated, stimulating the equipment investment tracker further.

“On the inventories side, manufacturers’ inventories were higher than expected, but auto inventories were significantly lower than expected, implying a slightly lower contribution from this sub-component to Q4 growth”, added Barclays.

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