Although Wednesday brought unwelcome news on the labor market, durable goods orders were resilient.
The 1.3% gain for October was a beat. Consensus was looking for 0.8%. September’s gain was revised higher.
It marks the sixth consecutive monthly rise, and will invariably be seen as a positive development given the read-through for growth.
Still, all October data has a “stale” feel to it considering November’s highly disconcerting coronavirus news flow. Manufacturing is arguably more insulated from new lockdown protocols which will affect the frontline services sector first, but factories obviously aren’t immune (no pun intended).
Notably, non-defense orders ex-aircraft (i.e., business investment) beat, rising 0.7% last month, after a 1.9% gain in September.
The comparable shipments print was a big upside surprise. The 2.3% gain — the best since July — was far better than the 0.4% nudge consensus expected, and bested even the most optimistic estimate. “Given the relevance of this component to real GDP forecasts, it was particularly constructive,” BMO remarked.
Markets will take this for what it is: Evidence that manufacturing activity stateside continues to rebound and is some semblance of stable.
There’s nothing in this particular report that would point to a contraction in Q4 (i.e., this quarter). That’s the new bogeyman — a Q4 downturn. Analysts and economists are starting to begrudgingly come around to the idea that a swoon in the first quarter of 2021 might be inevitable.