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Durable-Goods Orders Rise for Fourth Straight Month -- Update

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09/25/2020 | 11:47am EDT

By Amara Omeokwe

Orders for long-lasting factory goods increased for the fourth consecutive month in August, a sign of the manufacturing industry's continued recovery from coronavirus pandemic-related disruptions.

New orders for durable goods -- products designed to last at least three years -- rose 0.4% in August compared with July, the Commerce Department said Friday. The August increase was at a slower pace than earlier in the summer, when orders rebounded following a collapse in demand from early in the pandemic.

A closely watched proxy for business investment -- new orders for nondefense capital goods excluding aircraft -- also rose last month, increasing by 1.8%.

Orders for computers, communications equipment and machinery all rose solidly in August, helping drive the overall gain.

Andrew Hunter, senior U.S. economist at Capital Economics, said the report showed that "business equipment investment staged a V-shaped rebound in the third quarter." A V-shaped recovery is a sharp and quick economic recovery after a steep decline.

Weakness in motor-vehicle, commercial-aircraft and defense orders weighed on overall gains.

Cancellations of orders for Boeing Co.'s 737 MAX and other jetliners, as well as General Electric Co. and Pratt & Whitney engines, boosted the net loss of the industrywide aircraft and parts business above $27 billion this year through August, according to Friday's report.

The pace of durable-goods orders can signal demand for manufactured products and the volume of forthcoming factory production. Following steep declines in March and April, orders jumped sharply in May, June and July as the economy reopened from coronavirus-related shutdowns.

Recent indicators have suggested the manufacturing industry is bouncing back from disruptions. Surveys from data providers IHS Markit and the Institute for Supply Management, for example, showed factory activity grew in August, with gains in output and improvements in employment levels. A preliminary measure of manufacturing activity in September also accelerated, according to IHS Markit.

Still, the slowdown in gains for durable-goods orders follows other data that have indicated the overall economic recovery remains choppy. Applications for unemployment benefits, for example, have hovered around 900,000 a week during September, a sign of constrained hiring.

For durable-goods orders, "momentum has slowed since the strong bounce from reopenings but the signal from the core orders and shipments is still positive," said Rubeela Farooqi, chief U.S. economist at High Frequency Economics, in a note to clients. "The manufacturing sector is continuing to recover from low levels."

Doug Cameron contributed to this article.

Write to Amara Omeokwe at amara.omeokwe@wsj.com

 


Stocks mentioned in the article
ChangeLast1st jan.
GENERAL ELECTRIC COMPANY 0.69% 7.34 Delayed Quote.-34.23%
IHS MARKIT LTD. 0.46% 81.42 Delayed Quote.8.06%
THE BOEING COMPANY 0.08% 167.24 Delayed Quote.-48.70%
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