Durable goods orders edged 0.1% lower in September after being revised slightly higher for August. The decline follows solid increases in July and August, particularly in core capital goods (non-defense and ex-aircraft) orders, which gets to the heart of business investment. Gains were strongest in non-defense aircraft orders, motor vehicles and parts (although we are concerned that the vehicle industry is peaking) and machinery. Machinery orders are just beginning to climb out of the hole created by the collapse of manufacturing activity in response to the strong dollar and oil bust. In fact, investment appears to have bottomed in the oil industry; we saw signs of a modest turnaround over the summer, which we expect to gain momentum in 2017.
The largest decline for the month occurred in orders for defense aircraft; those orders are still higher, however, on a year-on-year basis. A more systemic weakness has emerged