Experts say U.S. economic growth in the fourth quarter won’t be as good as expected, thanks to the reason last month's durable goods orders climbed more than expected.
“The 0.4 percent rise in October’s durable goods orders was above the consensus forecast of a 0.6 percent decline but, unfortunately, for all the wrong reasons,” wrote Capital Economics’ Paul Ashworth in a Wednesday note.
This metric gauges products people purchase that are meant to last a long time, and includes everything from washing machines and toasters to jewelry and sports equipment. It also includes aircraft orders, which have been making the metric especially volatile in the past few months.
Based on the latest durable goods data, coupled with fresh personal income and spending reports, Ashworth predicts that fourth-quarter gross domestic product growth in the U.S. will likely be around 2.5 percent -- a drop from the 3 percent previously forecast.
The pessimism comes from the fact that most of the growth in durable goods came from the defense sector, which was been especially volatile over the past few months.
“Orders were boosted by a big jump in the defence component, which says nothing about private sector demand,” Ashworth wrote.
Orders for airline equipment fell 3.3 percent in September, but grew 3.4 percent in October. This was much higher than economists had expected, since Boeing received only 46 aircraft orders last month, down from 122 in September.
While durable goods orders as a whole were up 0.4 percent in October, without the defense sector they actually fell 0.6 percent, which was lower than forecasts made by analysts polled by Reuters.