US core durable goods orders fall unexpectedly

US core durable goods demand fell unexpectedly in October, recording the largest decline since March 2009.

New orders for core durable goods in the U.S. fell 2.7 percent in October on a monthly basis, the department of commerce said on Wednesday.

Markets had expected the new orders for core durable goods to rise by 0.4 percent in October.

“The decline in durable goods orders in October provides further evidence that the rapid rebound in industrial activity seen since the recession has faded. The orders data are volatile, so conditions are perhaps not as bad as they seem,” said Paul Dales, an economist with Capital Economics.

Including transportation, the total new orders for manufactured durable goods decreased by 3.3 percent in October, witnessing the biggest drop since January of 2009.

Also, shipments of manufactured durable fell by 0.9 percent compared with 0.1 percent gain in September.

While new orders of non-defense capital goods declined by 4.5 percent, defense capital goods orders fell by 21.3 percent.

“The fall in non-defence capital goods shipments suggests that the growth of business investment in equipment and software may well slow from the third quarter's annualised rate of 16.8 percent to around zero. That's enough to reduce fourth-quarter GDP growth, relative to third-quarter growth, by 1.4 percent,” said Dales.

Inventories of durable goods rose for a tenth consecutive month in October, up 0.4 percent.

“The support to investment from inventory rebuilding and previously postponed projects is clearly fading,” said Dales.

The U.S. economy grew a little more than expected in the third quarter, helped by a sharp drop in imports and a rise in private inventory investment, the U.S. Bureau of Economic Analysis said yesterday.

GDP increased at an annual rate of 2.5 percent in the third quarter, up from 1.7 percent in the second quarter.