Durable goods orders unexpectedly drop for 2nd straight month

Workers perform final inspections on 2015 Ford Explorers on the assembly line at the Chicago Ford Assembly Plant on Wednesday.
(M. Spencer Green, AP)

Orders for durable goods, a key indicator of manufacturing activity, unexpectedly dropped in September for the second straight month in a potentially troubling sign for the U.S. economy.

Orders for long-lasting products such as automobiles, computers and machinery decreased 1.3% last month, the Commerce Department said Tuesday.

The drop was led by a further decline in orders for commercial aircraft, a volatile sector that can cause big swings in the overall data.

September’s decline in durable goods orders followed a record 18.3% plunge in August. Economists had viewed that drop as an anomaly.


Commercial aircraft orders had surged in July, led by Boeing Co., which received nearly triple the orders it had in June. When orders for that sector returned to normal in August, it triggered the largest decline in overall durable goods orders since the federal government began collecting the data in 1992.

After the volatility, analysts expected durable goods orders to increase last month by 0.9%. Instead, the figure fell again, the first time it had dropped in two consecutive months since the weather-induced winter economic slowdown in December and January.

But the report wasn’t as bad as it looked, said Michael Montgomery, U.S. economist at IHS Global Insight.

“September was not a sterling month for durable goods orders, but it did not need to be, as prior months had been solid,” he said.


He noted that a decline in the aircraft sector accounted for 90% of the drop over the past two months. Orders for commercial aircraft and parts declined 16.1% in September following a 74% drop in August. Boeing, however, reported an increase in orders to 122 last month from 107 in August.

New orders for motor vehicles also were down last month, dropping 0.1% following a 6.6% decline in August.

Overall, orders for transportation equipment declined 3.7% in September after a 42.4% decline in August.

Excluding transportation, new orders were down 0.2% in September after a 0.7% increase the previous month.


A key indicator of overall business investment also fell last month.

Orders for non-defense capital goods, excluding aircraft, declined 1.7% in September, after a 0.3% gain the previous month. It was the second decline in three months.

For breaking economic news, follow @JimPuzzanghera on Twitter