Durable-goods orders surge due to Boeing plane contracts

If airplanes and cars are stripped out, new orders rose a more modest 0.5% last month, the government said. That was in line with forecasts.

The transportation sector often exaggerates the ups and downs in the durable-goods report.

In another positive, overall business investment rose strongly for the second month in a row. So-called core orders increased 0.6%.

That figure omits defense and transportation and is a proxy for broader business investment.

Companies have reduced investment since last year because of higher borrowing costs and a more uncertain outlook for the economy.

Also read: GDP jumps 4.9% as the U.S. economy speeds up

Key details: Orders for commercial planes leaped 93% in September. The latest batch of Boeing
BA,
+0.77%
contracts accounted for most of the increase in the headline durable-goods number.

Car dealers posted a 1% decline in new orders. Yet so far, the ongoing United Auto Workers strike has not had much effect on customer demand for new vehicles.

Omitting those two dominant industries, orders minus transportation still rose at a healthy clip. These orders give a better idea of the true condition of U.S. manufacturing.

Orders rise in an expanding economy and shrink in a contracting one.

Big picture: The industrial side of the economy has shown signs of improvement recently, but growth is unlikely to accelerate sharply until inflation is tamed and interest rates begin to come down again. Higher borrowing costs are usually a big drag on investment.

Looking ahead: “The underlying details weren’t as strong as the headline upturn suggests, but broad-based increases in new orders point to a possible bottoming in the manufacturing sector and rebound in business equipment spending in the last quarter of 2023,” said Jay Hawkins, senior economist at BMO Capital Markets.

Market reaction: The Dow Jones Industrial Average
DJIA,
-0.76%
and S&P 500
SPX,
-1.18%
opened mixed in Thursday trades.