Durable Goods Orders Up 1% in September

Machinery is up 7.9%

The U.S. Census Bureau on Oct. 28 reported that new orders for manufactured durable goods in September increased $1.6 billion or 1% to $165.7 billion. This was the second increase in the last three months. This followed a 2.6% August decrease.

Excluding transportation, new orders increased 0.9%. Excluding defense, new orders increased 0.5%.

Machinery, up five of the last six months, had the largest increase, $1.7 billion or 7.9% to $23.4 billion.

"The September report on new orders for long-lasting manufactured goods complements other recent data in painting a picture of a weak-kneed economic and manufacturing recovery," said Cliff Waldman, Economist for the Manufacturers Alliance/MAPI."Total new orders, excluding the volatile transportation component, were up by nearly 1% in September but remain more than 20% below year-ago levels. And the data for key supply chain industries are disappointing. Machinery demand rose by nearly 8% during September. But this only compensates for weak machinery activity during the past two months while demand remains nearly 30% below year-ago levels.

"Further, activity was nearly flat in the primary and fabricated metals sectors, which should, at this point, be showing more convincing strength if a normal factory sector recovery were in progress," he added. "Encouragingly, new orders for nondefense capital goods excluding aircraft, a proxy for business equipment spending, rose by a sharp 2% but only after two months of decline. Clearly, the more than 7% annualized gain in manufacturing output during the third quarter was driven by a leveling in what has been a rapid inventory liquidation, an output catalyst that will likely continue through the end of the year.

"The outlook for 2010 remains clouded, however, by fundamental issues in key drivers of sustainable demand. Historic excess capacity will be an impediment to a business investment turnaround while a soft global economic rebound will likely preclude a strong recovery in overseas sales of U.S. manufactured goods."

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