August Durable Goods

The Durable Goods and Core Durable Goods Orders numbers came in this morning for the month of August 2010.  A Durable good is a good that does not quickly wear out, or more specifically, one that yields services or utility over time rather than being completely used up when used once.

Core Durable Goods Orders is the change in total value of new purchase orders placed with manufacturers for Durable Goods, excluding transportation items (so orders like aircraft are kept out of this as they are considered too volatile and can distort the underlying trend).  The Core Durable Goods Orders number was forecast to come in at 0.9% and the actual headline number was 2.0%, which was a beat (so good news on the Core Durable Goods Orders front).

Durable Goods Orders is the change in total value of new purchase orders placed with manufacturers for Durable Goods (including aircraft).  The Durable Goods Orders number was forecast to come in at -0.9% and the actual headline number was -1.3% which missed forecasts (obviously aircraft skewed this number).

The core number looked better due to removing aircraft, but if you removed defense as well (to see how the commercial economy is doing then you get a number of -1.23%.  Hence defense spending propped up the Core Durable Goods Number, which is not a bad thing as defense spending is a part of our overall economy.  Categories doing well for new orders were; Primary metals, Fabricated Metals, Machinery, Computers and Electronics, and Electrical Equipment/Appliances.  Categories that did badly were Transportation (including motor vehicles) and Capital goods.  

The categories increasing in orders make sense as stores ramp up inventory for the Christmas season.  We'll have to see how this trends out over the next few months.