US Durable Goods Set To Decelerate With The Underlying Trend Remaining Strong

The US durable goods orders are expected to have decelerated the growth rate in October after experiencing a surprisingly strong September.

Although the data from the from the US factory sector have been optimistic lately, the economic activity tracked by other indicators showed some deceleration from September.

The US industrial production rising 0.9% over the month in in October, up from 0.4% in September and the ISM manufacturing survey showed the economic activity in the manufacturing sector in the US expanded in October for the 101st consecutive month.

The ISM manufacturing report fell 2.1 points to 58.7 from September’s 6-year high of 60.8, but new orders remained strong and the slowdown in the ISM headline reading from the all-time high in September was due to inventories and supply delivery sub-indices and to lesser extend slowdown of new orders, production, and employment.

Durable goods orders rose 2% in September and are expected to rise 0.4% m/m in October. Some economists expect durable goods orders to barely grow in October after strong growth rates in August and September that were affected to a certain extent by hurricanes and some payback might be seen in October.

Looking through the disruptions, the road ahead appears generally positive for upcoming factory orders. Core orders in September rose 1.7% while rising strong 12.4% over the year, supporting the positive outlook for the equipment spending in the US through year-end.

“Still, there will likely be some payback from the distortion resulting from the hurricanes in October, but we remain upbeat about the underlying trend”, analysts from Wells Fargo commented in their emailed forecast.

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