US Durables

What Are Durable Goods Orders?

Durable goods orders offer one of the earliest reads on manufacturing health and business confidence. This monthly report tracks new orders placed with US manufacturers for goods designed to last at least three years like aircraft, machinery, computers, appliances, and vehicles. 

Because businesses typically order these big-ticket items when they're confident about future demand, durable goods orders serve as a forward-looking indicator: a surge in orders today often translates to production, employment, and growth months down the road.

Understanding the Volatility Problem 

The biggest challenge with durable goods data is extreme month-to-month swings, particularly from transportation: 

• Headline durable goods orders include everything, but aircraft orders can move wildly. A single large order from an airline for 50 planes can add billions to one month's figure, followed by nothing the next. Defense orders for military equipment create similar volatility.
• Core capital goods orders (nondefense capital goods excluding aircraft) strip out both defense and aircraft to reveal the underlying trend in business investment. This measure focuses on the equipment and machinery businesses buy to expand capacity — industrial equipment, computers, production machinery.

Modest Gains Mask Mixed Signals 

New orders for manufactured durable goods in September rose 0.5% to $313.7 billion, marking the second consecutive monthly increase. This followed a strong 3.0% August gain. Beneath the headline, the details reveal a more nuanced picture: 

Key movements: 

• Transportation equipment: +0.4% to $110.7 billion (led the increase)
• Orders excluding transportation: +0.6%
• Orders excluding defense: +0.1%
• Shipments: +0.1% to $307.7 billion (machinery drove the gain, +1.4%)
• Unfilled orders: +0.7% to $1,489.7 billion (14th increase in 15 months)

A Worrying Split

The breakdown between defense and nondefense capital goods tells different stories: 

Nondefense capital goods orders: -0.9% to $94.0 billion 

• Shipments: -1.2% to $88.3 billion
• Inventories: -0.6% to $247.2 billion

Defense capital goods orders: +23.0% to $19.7 billion (a massive surge) 

• Shipments: +1.7% to $15.6 billion
• Unfilled orders: +2.0% to $209.7 billion

This split matters. Nondefense orders reflect private sector investment—companies buying equipment when they expect demand. That 0.9% decline suggests businesses are pulling back. Meanwhile, the 23.0% defense surge reflects government procurement, not organic economic momentum.

The Takeaway

September's durable goods report shows headline strength masking weakness in business investment. Total orders rose 0.5%, but core nondefense capital goods excluding aircraft declined 0.9%, suggesting companies are hesitating on expansion. The 23.0% defense surge propped up the headline but doesn't reflect broader economic confidence.

Growing backlogs (up 0.7%) and declining inventories suggest sustained work ahead, particularly in transportation. But the pullback in nondefense capital goods is noteworthy—business investment in productive equipment tends to lead economic activity, and when companies stop buying machinery, it often signals caution about future demand.