US: Durable goods orders likely to grow 0.5% - BMO CM

October durable goods orders should be driven by sturdy transportation activity, according to Michael Gregory, Deputy Chief Economist at BMO Capital Markets.

Key Quotes

“The past two months saw vehicle sales average their highest level in more than a dozen years, helping pare inventories and prompting new orders along the industry’s supply chain. And, although Boeing’s bookings dipped a bit, it was less than is typically experienced this time of year. Meanwhile, although the ISM new orders index also slipped in October, it remained above the 60 level for the past five months, a combination of strength and consistency not seen since early-2011.”

“Back then it was about recovery from recession, but now it’s about an economy starting to hit capacity constraints and firms attempting to boost productivity to counter late-cycle compression pressures on profit margins. We look for total durable goods orders to grow 0.5%. Excluding the aircraft and defence sectors, capital goods orders likely increased 0.7%, up for the 9th time this year.”