November 24, 2021

Durable goods orders declined 0.5% in October after falling 0.4% in September..  The October decline was in the very volatile transportation component.  Orders generally are growing steadily but the shortage of silicon chips is curtailing production across the board — automobile production in particular.

Frequently much of the change in durables — as in the case this month — is in the transportation sector — airplanes, cars, and trucks.  In October transportation orders fell 2.6% after having 2.8% in September .  The decline in October was in civilian aircraft orders which fell $2.8 billion.   Motor vehicle orders rose $2.4 billion.  Excluding the volatile transportation sector durable goods orders rose 0.5% in October after climbing 0.4% in September.  Orders continue to climb and are far higher now than the were prior to the recession.

Given the results of the orders component of the Purchasing Managers Index durable goods orders will continue to climb.

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And also from the Purchasing Managers report the ratio of orders to inventories is close to the highest it has been in a decade.  Manufacturers need to step up the pace of production to satisfy demand.  Their problems will be finding an adequate supply of skilled labor, coping with shortages of materials arriving from suppliers, and complying with social distancing requirements on the factory floor.  Production is not being constrained by a shortage of demand. Orders are robust.   Instead, manufacturers are having to deal with very evident supply constraints.

We expect  8.0% GDP growth in the fourth quarter followed by 4.9% growth  in 2022..

Stephen Slifer

NumberNomics

Charleston, SC