Durable-Goods Orders Rise for Fifth Consecutive Month -- Update
October 27 2020 - 10:42AM
Dow Jones News
By Jeffrey Sparshott
Orders for long-lasting factory goods increased for the fifth
consecutive month in September, the latest sign manufacturing
companies are rebounding from supply-chain disruptions and
shutdowns related to the coronavirus pandemic.
New orders for durable goods -- products designed to last at
least three years -- rose 1.9% in September compared with August,
the Commerce Department said Tuesday.
A closely watched proxy for business investment -- new orders
for nondefense capital goods excluding aircraft -- increased by 1%
last month. The measure had recovered all of its pandemic-related
losses by August, suggesting that businesses have ramped up
capacity in anticipation of growing demand.
"The economic recovery isn't entirely dependent on consumers,
with business equipment investment recording a swift bounce back to
pre-pandemic levels," said Paul Ashworth, chief U.S. economist at
Capital Economics.
Orders for transportation equipment helped drive overall gains
in September, while military orders were a big drag. Excluding
transportation, orders were up 0.8%. Excluding defense, they were
3.4% higher than the previous month.
U.S. factories were hit by health concerns, supply chain
breakdowns and shutdowns early in the coronavirus crisis. But
efforts to reopen the economy have helped manufacturers regain much
of the ground lost in March and April.
Alongside September's rise for durable goods, other gauges of
factory activity appear to show some momentum for the sector. Data
firm IHS Markit's survey of purchasing managers at U.S. factories
showed October activity expanding at the fastest pace since early
2019.
Demand has been especially high for autos, electronics and
communications equipment -- a category that includes telephones --
suggesting U.S. consumer demand is also helping lift factories.
Households have responded to the pandemic by cutting spending on
services such as travel and in-person entertainment, and increasing
purchases of goods such as cars and computers.
The report on durable goods adds to a mixed picture for the
economy heading into the fall.
The Commerce Department on Thursday is set to release its report
on third-quarter gross domestic product. Economists are forecasting
record-breaking quarterly growth, reflecting a
stronger-than-expected rebound following a sharp second-quarter
contraction. Still, the Federal Reserve in its most recent forecast
said it expects GDP to contract 3.7% this year, measured from the
fourth quarter of 2019 to the fourth quarter of 2020.
The strongest part of the growth rebound came in May, June and
July. More recent economic data suggest the economy is now growing
at a slower pace while overall output and employment remain well
short of pre-pandemic levels.
Tuesday's durable goods report is in line with that narrative.
Even with big gains in recent months, overall durable goods orders
are still shy of their immediate pre-pandemic peak.
"While the September data are positive, the risk to the
manufacturing sector now comes from surging virus cases that could
result in supply chains disruptions, weigh on demand and slow the
pace of rebound going forward," said Rubeela Farooqi, chief U.S.
economist at High Frequency Economics.
Write to Jeffrey Sparshott at jeffrey.sparshott@wsj.com
(END) Dow Jones Newswires
October 27, 2020 10:27 ET (14:27 GMT)
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