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US Durable goods orders rose 4.5% in August. According to analysts at Wells Fargo, it was fueled by aircraft and defense orders. They see that core capital goods orders and shipments continue to point to equipment spending moderating from the impressive pace of 2017.

Key Quotes:  

“Durable goods orders posted a sizeable rebound in August, increasing 4.5%. That followed a 1.2% drop in July and overwhelmed market expectations for a 2.0% gain. The details of the report were not nearly as impressive when it comes to the near-term outlook for business spending, but point to continued growth in equipment spending and significant contributions to Q3 GDP from government spending and inventories.”

“New orders still provide some reason to expect that shipments can gain more ground in the current quarter. Although core orders fell in August, the three-month average annualized rate continues to grow at a double-digit pace. The regional Fed manufacturing surveys thus far for September also point to orders holding up. A simple average of the Philadelphia, New York, Richmond and Dallas new orders components rose 2.7 points in September and remains near cycle highs.”

“Inventories still look on track to boost Q3 GDP as well. Although durable goods inventories fell in August, they are up 1.2% from the second quarter average. We currently have penciled in a $30 billion annualized build in total real inventories for Q3. While that is well below the expansion’s average quarterly increase of $52 billion, it would be enough to add about 1.5 percentage points to GDP after inventories contracted in Q2.”