Northwest Arkansas Democrat-Gazette
Orders for durable goods drop 1.1%
WASHINGTON — Orders to U.S. factories for big-ticket manufactured goods tumbled in September by the largest amount in four months while a closely watched category that tracks business investment fell for a second month.
The declines underscored the troubles manufacturing is having in the face of a global slowdown and trade war uncertainty.
The Commerce Department said Thursday that orders for durable goods dropped 1.1% in September, the biggest setback since a 2.3% decline in May. Orders in a category that serves as a proxy for business investment spending dipped 0.5% after a 0.6% decline in July.
Many economists say growth would have slowed even more without two interest-rate cuts from the Federal Reserve. The Fed meets again next week and financial markets are looking for a third quarter-point rate reduction as insurance against a possible recession.
U.S. manufacturing has been struggling this year as a global slowdown and President Donald Trump’s gettough trade policies have hurt export sales. Auto production also was curtailed because of a strike at General Motors.
A separate report Thursday from the Labor Department showed initial unemployment claims fell by 6,000 to 212,000 last week, indicating the labor market remains generally tight. Overall, the level remains close to a halfcentury low as fewer people seek jobless benefits.
The applications, considered a proxy for layoffs, have remained at extremely low levels for an extended period.
The 1.1% decline in orders
for durable goods, items expected to last at least three years, reflected weakness in a number of areas led by transportation, which dropped 2.7%.
Demand for commercial aircraft fell 11.8% in September after a 17.2% decline in August. This category has been hurt by the troubles at Boeing, which has suspended production of the 737 Max while two deadly crashes are being investigated.
Auto production fell 1.6% in September, the second monthly decline, with weakness in this area reflecting in part a strike at General Motors.
The GM strike, which began on Sept. 16, led to a 4.2% decline last month in auto production. The automaker reached a tentative four-year deal last week with workers who took to the picket lines for a month.
Excluding the volatile transportation sector, durable-goods orders would still have declined 0.3% in September after a 0.3% increase excluding transportation in August.
Orders for machinery edged up a slight 0.2% in September while demand for computers was up 1.4% and communications equipment rose 1.5%.
The overall economy, as measured by the gross domestic product, is expected to have slowed to a rate around 1.5% in the justcompleted July-September quarter, lower than the 2% growth seen in the second quarter.
“There’s a lot of uncertainty hanging over manufacturing and softness in the global economy,” said Ryan Sweet, head of monetarypolicy research at Moody’s
Analytics Inc.
Even so, “this expansion can go on without a large contribution from manufacturing” given that it’s a relatively small part of the economy, Sweet said.
Not all the economic news was so grim on Thursday. A preliminary purchasing managers index from IHS Markit showed U.S. factory activity actually improved slightly in October for a second month though it remained relatively subdued.
In addition, the Bloomberg Consumer Comfort Index’s buying-climate gauge climbed to a fresh record, suggesting spending, the economy’s mainstay, will remain solid.