Defense boosted US durable good orders in October

Washington (AFP) –


An uptick in defense orders accounted for a larger-than-expected bounce in durable goods orders in October, according to US data released Wednesday.

The Commerce Department report put the increase in orders for big-ticket items such as industrial equipment and automobiles at 1.3 percent to $240.8 billion, above the 0.8 percent increase projected by analysts.

The agency also lifted the estimate of September durable goods orders by 0.2 percent to 2.1 percent.

But analysts cautioned that the manufacturing sector behind durable goods was vulnerable in the upcoming period because of the latest surge in coronavirus cases could prompt some companies to defer or cancel orders.

Without the boost from defense orders, the increase in overall orders would have been just 0.2 percent, reflecting in part a decline in motor vehicle orders (-3.2 percent).

The durable goods orders report came as the Commerce Department also confirmed that US third-quarter growth jumped 33.1 percent in its second estimate of gross domestic product.

That historic increase marked a significant reversal from the devastating 31.4 percent dive in growth in the second quarter as the US severely cut back activity to counter the coronavirus.

Analysts warned that manufacturers face challenges in the upcoming period. The US is currently recording more than 150,000 new coronavirus cases per day and public health authorities warn the number could spike further during the upcoming holiday period.

"Looking ahead, durables activity, and capital spending more broadly, will face a tougher recovery as businesses confront the rapidly escalating health crisis without the relief of generous fiscal aid," said a note from Oxford Economics.

"High frequency data shows the recovery is weakening under the weight of the raging pandemic, consumer goods spending is losing momentum, and imminent fiscal stimulus isn't likely."

Rubeela Farooqi, chief economist at High Frequency Economics, said in a note that "the manufacturing sector remains exposed to surging virus cases that could disrupt supply chains, weigh on demand and slow the pace of rebound going forward."