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Declining Aircraft Sales Pushes Durable Goods Orders to 15-Month Low

Nov. 22, 2018
Total orders for US durable goods unexpectedly fell 4.4% to $248.5 billion, marking their third decline of the last four months.

A steep decline in aircraft sales last month pushed orders for big-ticket, US-made goods to their largest drop in 15 months, the government reported on Nov. 21.

The decrease was far steeper than economists had expected and came with downward revisions to prior months. Outside the volatile aviation sector sales rose modestly.

In another sign of potential weakness, a closely watched measure that is often viewed as a proxy for business investment -- orders of non-defense capital goods excluding aircraft -- was flat following declines in the prior two months.

The result could weigh on GDP calculations for the final quarter of 2018.

Total orders for US durable goods unexpectedly fell 4.4 percent to $248.5 billion, marking their third decline of the last four months, according to the Commerce Department. 

The result was the biggest drop since July of last year. Forecasts had called for a decline of only 2.6%.

Sales of aircraft, which see broad swings from month to month, led the decline: civilian aircraft were down 21.4%, adding to September's 19.3% drop, while military aircraft fell nearly 60%.

Autos posted a token 0.2% gain.

Excluding transportation, sales rose 0.1%, undershooting forecasts for a 0.4% gain but reversing some of September's 0.6% decline.

Primary metals and machinery both fell for the month while communications and electrical equipment both rose.

But non-defense capital goods excluding aircraft -- a segment that can track changes in oil prices and was a target of last year's Republican-driven tax cuts -- was flat for the month.

Ian Shepherdson of Pantheon Macroeconomics said the numbers showed that President Donald Trump's trade war was likely hurting American manufacturing. "This might be nothing more than a correction after a run of exceptionally strong numbers in the spring and early summer," he said in a client note.

But he noted that recent industry surveys suggested it was instead due to the trade war with China, adding that "any further intensification of the trade war would be potentially disastrous."

"In short, the administration is playing with fire, and we're beginning to detect the smell of burning in the air," he wrote.

Copyright Agence France-Presse, 2018

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