Biggest durable orders drop in 2 years

Orders fall 6.2%, marking the largest percentage decrease since October 2006.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Julianne Pepitone, CNNMoney.com contributing writer

Should the Obama administration launch a massive stimulus plan upon taking office?
  • Yes
  • No

NEW YORK (CNNMoney.com) -- Orders for durable goods declined sharply in October, marking the largest percent decrease in two years, the government reported Wednesday.

Orders in the Commerce Department report fell 6.2% to $193 billion, a much steeper drop than the 2.5% decrease expected by a survey of economists by Briefing.com.

It was the largest decrease since October 2006, when orders fell 8.3% decrease. Orders have now fallen for three straight months because September was revised to a 0.2% decline from a 0.8% increase.

"There's almost nothing positive here," said Sam Bullard, economist at Wachovia. "The weakness was broad-based. That's the consumer pulling back on big-ticket items."

The only increase in new orders was communications equipment, up 7.7%

Nondefense, nonaircraft capital goods - considered an indicator of business spending - decreased 4%, following two consecutive decreases.

That number is "a good proxy for business equipment spending," Bullard said. "With that decreasing over the past 3 months, it points toward significant weakness."

That downward trend should persist over all of next year, Bullard added, predicting it would not recover until the early part of 2010.

New orders on transportation equipment plummeted 11.1%. This shows businesses are pulling back, Bullard said, noting that the recent Boeing strike likely affected domestic orders.

Excluding transportation, new orders decreased 4.4%. Excluding defense, they decreased 4.6%.

Shipments of manufactured durable goods decreased 2.4% to $202.9 billion.

Unfilled orders were down for the first time in 26 months, at a decrease of $4.6 billion, or 0.6%.

Inventories of manufactured durable goods, up 15 of the last 16 months, increased $1.4 billion or 0.4%. This is the highest level since 1992, according to the report.

"Eventually it will turn around, but these numbers are down so low," Bullard said. "At this point, we're not quite at the 2001 recession. But the numbers will get even lower, and they will reflect the more severe contractions of the mid-70s and early 80s recession."

Durable orders measures the dollar volume of orders, shipments and unfilled orders of goods built to last three years or more. The report is viewed as an indicator of manufacturing activity. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
Coolest innovations around the world From flying cars to floating schools, these innovations are improving the lives of people around the world. More
6 luxury getaways to escape your digital life Step away from your smartphone. No Facebook or Twitter here. These are six places where luxury travel agents send clients looking to unplug and experience the ultimate digital-detox getaway. More
Most reliable cars - Consumer Reports These cars, trucks and SUVs scored best in the magazine's latest survey of vehicle owners. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.