US durable goods orders rise in Sept but chiefly in aircraft

27 October 2010 14:33  [Source: ICIS news]

WASHINGTON (ICIS)--New orders for US durable goods rose by 3.3% in September, the Commerce Department said on Wednesday, but that gain was caused solely by aircraft sales while demand for the broad range of other manufactured durable goods fell by 0.8%.

In its monthly report, the department said durable goods orders last month were up by $6.3bn (€4.5bn) compared with August to nearly $199.2bn and followed a 1% gain in August.

Durable goods are manufactured products meant to last three years or more and include such items as automobiles, appliances, transportation and manufacturing equipment. 

Many durable goods, such as computers and automobiles, are major downstream markets for chemicals and derivatives used in manufacturing processes or as end-product components.

However, the September advance in overall durable goods orders was caused by a sharp rise in sales of US-made civilian airliners, which jumped by 105% last month.

Economists typically look at durable goods data minus aircraft sales because airliner orders often are made in multiple-plane purchases and in any given month those commitments - or their lack - can affect manufacturing data disproportionately.

With aviation equipment orders subtracted, recent data for US durable goods orders have fluctuated over several months.

In August, orders for durable goods minus aircraft rose by 2%.  But in July and June sales of durable goods other than air transport equipment fell by 4% and 0.6% respectively.

The department also reported that unfilled orders for durable goods rose by 1% or $7.9bn in September from August to $813.2bn, the sixth straight month of improvement.  Here too, however, the gain was attributed chiefly to a 1.2% advance for aviation equipment, but other categories did see a gain of 0.6%.

Gains in unfilled orders are seen as a positive sign for the economy because they suggest that demand is growing at a pace faster than manufacturers can produce.

Inventories of unsold manufactured durable goods rose by 0.5% in September from August, the department said, rising by $1.7bn to $314.7bn. 

As in other categories, the build in inventories was strongest in civilian aircraft, up by 3.7% last month, compared with all other manufactured durable goods, which saw a modest 0.2% gain in inventories.

Some economists say a decline in inventories of manufactured goods is a positive sign, indicating that demand is growing faster than production.

But others contend that a decline in inventories indicates that manufacturers are worried about the prospects for near-term sales and consequently are slowing production to avoid an inventory overstock.

US durable goods orders and inventories*

	Sept           (bn $)	Sept vs Aug          (%)	Aug vs Jul (r)              (%)
New orders	199.2	3.3	-1.0
Unfilled orders	813.2	1.0	0.1
Total inventories	314.7	0.5	0.6

r: revised  *seasonally adjusted

($1 = €0.71)

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