US DATA
September's final report on Manufacturers’ Shipments, Inventories, and Orders showed continued weakness in recent demand for manufacturing orders and durable goods production, reaffirming that US industrial activity remains soft if stable.
- Manufacturing orders fell for the 4th month in 5 in September, at -0.5% M/M SA as expected. With August orders revised sharply lower (-0.8% vs -0.2%), the level of orders in nominal seasonally-adjusted terms remains below year-ago levels.
- In a slightly better sign, final durable goods orders data showed growth in September was actually revised up by 0.1pp (-0.7%), with the key core category (nondefense, ex-aircraft and parts) upped by 0.2pp in the final estimate to 0.7% M/M. With the revision, this was the strongest monthly growth for core capital goods orders since August 2023, for a new all-time high in the series ($74.1B).
- That's a mildly positive sign for equipment business investment, which has been a strong contributor to real GDP in the last couple of quarters, but to put it in perspective, that's in nominal terms and only up 0.3% Y/Y.
- Core shipments remain weak (flat/negative M/M in 7 of the last 8 months) at -0.1%, which is a factor in the quarterly GDP calculation. The upward revision from the initial -0.3% M/M estimate implies a slightly better Q3 GDP, but a still-subdued picture for business investment, with core shipments flatlining at roughly the same levels as early 2023.
- In turn, that's in line with manufacturing surveys that have been steady in slight contractionary territory (ISM for example since late 2022).
- In short, core durable orders have stabilized, which should mean that weakness should be limited for durables shipments. However, there are no signs of improved momentum going into Q4. And as with other areas of the economy, October activity could be somewhat difficult to read due to hurricane effects.
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