Orders for durable goods – an important gauge of business spending in the US – fell by 1.2% month-on-month in September, slightly above estimates of a 1.5% drop. This follows a downwardly revised figure of -3.0% in August.
Excluding transport equipment, durable goods orders fell by a smaller 0.4%, though this was sharply below forecasts that it would stay unchanged. The core rate was also subject to a downward revision for August, which was lowered to -0.9% from 0.0%. Another key investment measure – orders for non-defence capital goods excluding aircraft – was also negative, falling by 0.3% in September.
Spending on transportation equipment was down by 2.9%, mainly due to a 35.7% plunge in commercial aircraft orders. But automobiles and parts was a bright spot with orders rising by 1.8%.
The disappointing figures raise concerns that the strong dollar and weak overseas demand are having a longer-term impact on US business investment plans than initially anticipated as orders have now fallen in four of the past six months. The energy sector has also been hit hard by the ongoing slump in oil prices as the industry has drastically scaled back spending plans.
As the last major data before Wednesday’s FOMC decision, today’s numbers do little to assure Fed policymakers that the US economy is not headed for a soft patch. While most economists still expect the Fed will raise rates in December on the basis of a healthy jobs market, interest rate futures are pointing to March 2016 as a more likely date. Investors will now be looking closely at the two remaining jobs reports before the Fed’s December meeting for further guidance.
The dollar moved higher after the better-than-expected data and was unfazed by the downward revisions to previous month’s figures. It firmed to 120.46 yen having drifted lower for much of the day against the Japanese currency. The euro had rallied from 1.1035 to 1.1078 dollars but fell back to around 1.1040 after the data. Sterling also see-sawed against the greenback having fallen then recovered from the soft UK GDP data. Cable was down at 1.5315, having earlier peaked at 1.5358.