US durables

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No business likes to see the value of orders coming in below that of goods heading out. So the US manufacturing industry will be feeling distinctly pessimistic. Survey data released by the Commerce Department on Thursday showed that both shipments and orders for durable goods – long-lasting manufactured products – declined sharply in October. Orders fell by 6 per cent to $193bn from the month before, faster than goods dispatched: down 2 per cent to $203bn.

Economists will also be glum. The drop in orders was twice that predicted by the average of 72 forecasts collected by Bloomberg. It is by nature a volatile index but, as the downturn accelerates, forecasters are finding it harder and harder to be too pessimistic. Managers are at least ahead of the game. The drop in durable orders reflects a sharp cut in capital spending of all stripes as businesses ready themselves for a severe slump in demand. Communications equipment was the only sector to show a rise in orders for October but that reflected a recovery after a 16 per cent decline the previous month. Transport, meanwhile, is faring worst. Car orders are off 23 per cent from a year ago and orders for commercial aircraft have almost halved.

As an indication of how deep this downturn is becoming, the records are starting to congeal round past recessions. The past three months were the worst for durable goods orders since 1992. Annualised car sales of 10.6m were last this low in 1991. But it is still possible to slip further back. The October Institute for Supply Management’s index of manufacturing activity indicated the fastest contraction since 1982. On Monday it may be back to 1980 levels. Durability is in very short supply.

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