The impact of elevated interest rates continued to show up in the business equipment spending data, which came in lower than expected in the Commerce Department’s data released on Wednesday.
Overall orders for durable goods fell by 5.4% in October, led by a 49.6% decline in nondefense aircraft because of a drop in Boeing orders.
Core capital goods orders, which excludes aircraft and defense equipment and is a proxy for future business investment, fell for the second consecutive month, down by 0.1%.
Shipments of core capital goods remained unchanged in October, aligning with our forecast of a slowdown in business activities in the final quarter.
Still, we believe that the influence of the decline in the number of orders on gross domestic product will most likely be insignificant, as the nonresidential investment component did not contribute anything to growth in the third quarter.
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With the disinflation trend continuing, we anticipate improved financial conditions next year, providing much-needed support for a rebound in business investment.
In a separate report, new jobless claims plunged by 10.3% to 209,000 last week, falling below pre-pandemic levels. This helped alleviate concerns about rising layoffs after claim numbers spiked in the previous weeks.
We remain far from the recession threshold of 250,000 new claims per month, as the labor market continues to serve as a robust defense against recession fears.
Looking ahead, we expect new claims data to fluctuate during the holiday season. This underscores the importance of focusing on the long-term trend, such as our preferred metric, the 13-week moving average.
Given the new claims data, we should anticipate another strong month of job gains in November, surpassing 100,000, which is the Federal Reserve’s threshold for a balanced labor market.
Continuing claims also posted a drop for the week ending Nov. 11, the first drop since September. The data pointed to 1.84 million unemployed workers remaining on benefits.
Wednesday’s data on jobless claims and durable goods orders have added more mixed signals to the economic picture in the final quarter. There remain a number of two-sided risks that require the Fed to stay firmly on its course for until at least early next year.