The manufacturing sector shrugged off the relentless rise in interest rates since March 2022 with durable goods orders soaring 4.7% in September—the largest increase since July 2020—following a downwardly revised drop of 0.1% in August. Overall orders have climbed in five of the last seven months, pointing to some resiliency in a still-soft U.S. manufacturing sector. The solid increase was broad-based and was led by capital goods (+13.9%) and volatile transportation orders (+12.7% after two straight monthly declines). Orders for computers and electronics, fabricated metal products and machinery rose 1.0%, 0.9% and 0.9% and supported the increase. Headline durable goods orders are up a seasonally adjusted 7.8% from a year ago, a sharp improvement from 3.3% in August. New orders excluding transportation climbed a much more modest 0.5% in September and are 1.7% higher than a year ago, up from 1.2% in August. Orders for nondefense capital goods excluding aircraft—a closely watched proxy for business spending plans—advanced 0.6% in September on the heels of a solid 1.1% increase in August, pointing to favorable momentum for business spending in quarter four.

Bottom line: This is a very solid report that underscores some resiliency in the U.S. manufacturing sector despite rapid increases in interest rates and still-high inflation. The underlying details weren’t as strong as the headline upturn suggests, but broad-based increases in new orders point to a possible bottoming in the manufacturing sector and rebound in business equipment spending in the last quarter of 2023.

Table 1 - United States — Durable Goods Orders

(month/month % change : s.a.)

Source: BMO Economics, Haver Analytics

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