With interest rates rising rapidly this year, the U.S. factory sector missed the memo that a recession was said to be looming.
Orders for durable goods at U.S. factories, which are expected to last three years or more, surged 1% in October, twice what economists had expected for the month and triple last month’s downwardly revised 0.3% gain. times more.
Shipments of durable goods, which reflect quarterly and annual economic growth data, rose 0.4 percent, up from 0.3 percent a month earlier.
Orders for nondefense capital goods excluding aircraft, seen as a proxy for business investment, rose 0.7%, stronger than expectations for a 0.2% rise. Orders for these core capital goods fell 0.8% last month. Economists see this unchanged from the previous month.
Shipments of core capital goods jumped 1.3% after falling 0.1% in September. The predicted increase was much smaller at 0.2%.
Durable goods orders are considered a bellwether of the economy, rising as the economy expands and falling when the economy contracts. Many economists expect weak growth or even contraction by the end of 2022, but most signs point to the economy performing better than expected. The Atlanta Fed’s GDPNOW indicator showed economic data received so far pointing to growth of 4.2% in the fourth quarter, well above the consensus estimate of less than 1%. Bank of America’s GDP tracker shows economy growing 1.3% compared to before
The figures are nominal, meaning they don’t take inflation into account, although October’s price data was mixed, making it unclear how that would cut the numbers. From the perspective of US producers, the producer price index, a key measure of inflation, rose 0.7% in October. The producer price index for goods excluding food and energy rose 0.7%. On the other hand, the consumer durables index fell 0.1%. The private capital equipment price index rose 0.3%.
Stock futures turned negative after the data, likely as investors priced in a higher “terminal rate” — the expected top federal funds rate — next year. Stronger growth would give the Fed more room to raise rates next year, as it would to fight inflation. On the other hand, persistently high demand for commodities could keep inflation higher than expected, complicating the Fed’s efforts.
Orders for new cars and trucks rose 0.6%. Shipments, however, rose just 0.2 percent, suggesting supply chain issues persist.