Market Overview

October Durable Goods Orders Beat Estimates

The Commerce Department released durable goods orders for October showing orders up slightly to $216.9 billion following a 9.2 percent increase in September. Even though orders were flat month-on-month, today's report beat analyst estimates. Durable goods orders are usually inflated in September, which is the end of the U.S. government's fiscal year.

Excluding transportation, which is a volatile data component, October orders were up 1.5 percent. Excluding defense, orders were up 0.1 percent.

Machinery orders showed the biggest increase in the value of new orders, up 2.9 percent month-on-month to $30.9 billion. Shipments were down by 0.6 percent in October to $222.2 billion while unfilled orders increased by 0.2 percent to $982.5 billion. Inventories were up 0.4 percent to $374.4 billion.

Other sectors showing strong growth were communications equipment, up 11.4 percent month-on-month, and electrical equipment appliances and components, up 4.1 percent month-on-month.

“The figures suggest growing confidence in the economy among companies,” The Wall Street Journal wrote. “A key barometer of business investment—nondefense capital-goods orders excluding aircraft—advanced 1.7 percent, the strongest increase since May.”

Durable goods orders are seen as a very volatile economic indicator—defense orders and orders for civilian aircraft can have a big impact on the total figure—so markets do not generally react strongly to the announcement. However, today's numbers did support the U.S. dollar, which is trading higher against both the euro and the yen.

Economists were generally upbeat following the announcement. "On balance, you would have to look at this number and say it is encouraging. It is one piece of a many piece puzzle, but a good piece,” Hugh Johnson of Hugh Johnson Advisors told Reuters. “For those of us that are worried about the economy in 2013 given the uncertainty of the fiscal cliff, this is a little bit helpful. But that doesn't removing [sic] the overarching worry about the cliff or that tax policy and spending policy will not be right given the weak economy."

According to the Commerce Department, no business reported a disruption due to Hurricane Sandy, which made landfall near Atlantic City, New Jersey on October 29. It may be possible that the impact of Sandy will be felt in the November data when it is released on December 24.

Despite the strong order numbers reported, telecommunications equipment makers are largely unchanged in midmorning trading.

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