The numbers: Orders for durable or long-lasting goods sank 5.4% in October because of fewer contracts for Boeing passenger planes, but most other manufacturers also reported somewhat weaker demand.
Economists polled by the Wall Street Journal had forecast a 3.4% decline.
If airplanes and cars are stripped out, new orders were flat last month, the government said. That was below forecasts.
The transportation sector often exaggerates the ups and downs in the durable-goods report. Yet overall business investment also fell for the second month in a row.
These so-called core orders slipped 0.1% in October. The figure omits defense and transportation and is a proxy for broader business investment.
Higher borrowing costs have discouraged companies from borrowing and investing as much. Core orders have fallen in four of the past five months.
Key details: Orders for commercial planes tumbled 50% in October after a huge 91% increase in the prior month.
Ford
F,
and other carmakers also reported a 3.8% drop in new orders partly because of the United Auto Workers strike. Higher car prices and interest rates have also dulled the appetite of consumers for new vehicles.
Omitting those two dominant industries, orders minus transportation were unchanged. These orders give a better idea of the true condition of U.S. manufacturing.
Big picture: The industrial side of the economy is unlikely to undergo a big rebound until interest rates decline. Higher borrowing costs sap consumer demand and discourage business investment.
The Federal Reserve is not expected to cut interest rates until the middle of 2024 at the earliest.
Looking ahead: “The durable goods orders data for October were definitely on the soft side,” said chief economist Stephen Stanley of Santander Capital Markets. “Momentum has waned, presumably in response at least in part to higher borrowing rates.”
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
were set to open higher in Wednesday trades.
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