US Durable Goods Orders Miss Analyst Expectations

November orders for durable goods accentuate investment in business equipment has slowed in the fourth quarter.  Although orders did rise in November—by 0.8 percent—it comes after a much sharper decline of 4.3 percent in October.  Fortunately, these numbers align with economist forecasts for November and the close of the year.

Durable goods refer to consumer goods that are expected to last at least three years.  This includes things like kitchen appliances, furniture, automobiles, airplanes, and computers.  While durable goods spending obviously only represents a very small part of American economic activity, economists watch this metric because it is actually a strong sign of the direction of the economy, overall.

In addition, nondefense capital goods orders—not including aircraft—fell 0.6 percent last month.  These are known as “core capital goods,” and this is their second decline in the last three months.  Also, core goods shipments fell by 0.1 percent; and orders, overall—not including defense orders—fell 0.1 percent.

As a matter of fact, this decline is the third in four months for business equipment orders and that might be cause for concern. Market sentiment seems to agree with this concern as stocks are in dramatic decline across all indexes. Indeed, it seems corporate investment and factory activity are vulnerable, right now, to a more indicative economic slowdown.  With oil prices down, as well, we might also see a slowing in energy spending.

All this in mind, policymakers at the Federal Reserve lowered their projected interest-rate hike path, this week, on the heels of companies dealing with tariff uncertainty.  And this all comes at a time when that tax cut boosts are about to trickle out.

In a different report released on Friday, the United States Department of Commerce indicates the third-quarter GDP grew at an annualized rate of 3.4 percent. This is revised from 3.5 percent, which still amounts to the fastest two-quarter pacing growth since 2014.  The revisions reflect a downward revision to consumer spending and net exports which, unfortunately, showed the biggest fall since 1984.

On a separate, but related, issue, gold prices saw a bit of a bump in response to the decline in durable goods.