By Jeffry Bartash, MarketWatch
The numbers: Orders for durable goods such as autos and metal parts rose 1.9% in September for the fifth month in row and business investment strengthened again, signaling a steady expansion among American manufacturers that have led the way in the U.S. economic recovery.
The increase in orders last month easily topped Wall Street expectations. Economists surveyed by MarketWatch had forecast a 0.2% decline.
New orders minus transportation rose a somewhat smaller 0.8%, the government said Tuesday . Regular ups and downs in transportation often exaggerate monthly changes in the level of demand.
The strong showing in industrial demand in September adds to the likelihood that gross domestic product in the third quarter expanded by more than 30% on an annualized basis. The GDP report will be released Thursday.
What happened: Orders for new cars and trucks increased 1.5% last month, snapping back from sharp decline in August.
Auto sales have been surprisingly strong since the onset of the pandemic, reflecting the lure of record low interest rates, more people moving out of the cities, and a decline in the use of public transportation.
Orders for passenger planes also rose in September, but they were still quite weak. Airline manufacturers have suffered a deep decline in new orders and the cancellation of existing ones in light of the collapse in air travel. Boeing /zigman2/quotes/208579720/composite BA -1.20% has been a big drag on the overall level of U.S. industrial demand.
Outside of transportation, orders were mixed.
Bookings rose for primary metals and fabricated-metal parts used in many goods. That’s usually a sign of rising industrial demand.
Bookings fell slightly for machinery, however. They also declined for computers and electrical equipment including appliances.
The increase in investment is a welcome sign that suggests businesses believe the economy will improve next year, but companies are still being very cautious. The latest coronavirus outbreak in the U.S. and around the world is only likely to add to their caution.
The big picture: Manufacturers have played a major role in the recovery in 2020, but they are unlikely to go unscathed by the latest coronavirus outbreak if it hurts the broader U.S. or global economies.
The recent improvement in business investment, for its part, is more of a bet on next year instead of this one. There could be some rockier times in between now and then.
What they are saying? “The 1.9% rise in durable goods orders in September demonstrates that the economic recovery isn’t entirely dependent on consumers, with business equipment investment recording a swift bounce back to pre-pandemic levels,” wrote Paul Ashworth, chief U.S. economist, in a note to clients.
“ With fiscal support still uncertain, and new virus cases again trending higher, the demand outlook has weakened, which could put the recovery in business investment in jeopardy,” said economist Katherine Judge of CIBC Economics.