Core capital goods orders, shipments rise as outlook improves

e, sNew orders and shipments of core capital goods went up slightly in August ahead of a potential improvement in the equipment spending market now that interest rates have begun to decline.  

August’s seasonally adjusted value of core capital goods orders, excluding aircraft and defense equipment, was $73.7 billion, up 0.2% month over month following a revised 0.2% decline in July, according to the Monthly Advance Report on Durable Goods Manufacturers’ Shipments Inventories and Orders released by the U.S. Census Bureau Sept. 26.  

Seasonally adjusted shipments for core capital goods also totaled $73.7 billion in August, up 0.1% MoM after a revised 0.4% drop in July, according to the report. Meanwhile, seasonally adjusted shipments for durable goods were $289.4 billion, down 0.5% MoM following a revised 1.1% rise in July.  

Seasonally adjusted new orders for durable goods landed at $289.7 billion in August, up 5 basis points (bps) MoM after a revised 9.9% increase in July, as durable goods orders were limited by the transportation industry, according to a research note from Wells Fargo. 

“Despite an upwardly revised surge in July durable goods orders, the payback decline that had been feared did not materialize in August with durable goods orders technically positive, but essentially flat,” the note stated. “Excluding transport categories, durables orders had their best month of the year.” 

Unfilled orders, total inventories  

Seasonally adjusted unfilled orders for core capital goods reached $265.9 billion in August, down 2 bps compared with July, following a 4-bps revised drop in July by the Census Bureau. Meanwhileasonally adjusted total inventories for core capital goods hit $163.4 billion in August, up 0.2% after July was revised to a 0.1% increase. 

Seasonally adjusted unfilled orders for durable goods totaled $1.39 trillion in August, up 0.4% MoM after a revised 0.2% rise in July, according to the report. Seasonally adjusted total inventories for durable goods finished at $529.8 billion in August, up 0.1% compared with July following a revised 0.1% increase the previous month. 

Since the Federal Reserve cut interest rates in September, there’s potential for capital expenditures and equipment spending to improve, which will improve durable goods and core capital goods, according to the Wells Fargo note. 

“With interest rates finally coming down, we expect to see capital spending budgets tilt in favor of a broader recovery in durables spending,” the note said. “The silver lining is that with rates now heading lower it may be a shorter wait for the medicine to take and that suggests scope for a rebound in equipment spending in the year ahead.” 

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