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Durable Goods Orders & Personal Income Data

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The US durable goods orders will be coming out today. Forecasts indicate a possible decline in August.

A panel of economists polled expects US durable goods orders to fall 3.1% on the month in August. This would reverse the 2.0% revised print in July.

U.S. Durable Goods Orders
U.S. Durable Goods Orders

Excluding defense, spending on durable goods could rise by just 0.1 percentage points in August. This follows a 1.3% increase previously.

Finally, durable goods orders excluding transportation are forecast to rise by 0.1% after falling 0.4% previously.

The report comes amid a struggling US manufacturing sector. This is not just limited to the United States but a global slowdown as well.

Reports for August showed that the manufacturing activity fell below the 50-level. The ISM’s manufacturing PMI fell 2.1 points to 49.1 in August. A decline below the 50-level on the index indicates weakness.

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Airbus & Boeing Report Lower Orders in August

The durable goods report comes as aircraft orders fell significantly in August. During the month, both the firms delivered 18 and 42 commercial jets during the period.

This was a smaller pace of orders compared to July’s 64 and 54 respectively during the same period a year before.

The decline in the aircraft orders comes primarily due to the weakness in sales from Boeing. The company has been facing an uphill battle after a series of air crashes. This resulted in Boeing’s 737 MAX being pulled out of service and cancellation of orders as well.

But it should be noted that the increase in the headline durable goods orders came because of a jump in orders from Boeing. The company saw a 47.8% surge in aircraft and parts orders.

Activity from Boeing was somewhat weaker for the month of August. This could potentially see lower figures for August. The market reaction could be muted, however, due to the volatility of the durable goods orders report.

But a surprise drop beyond the expectations could see some repricing taking shape.

Personal Spending Expected to Slow in August

The monthly personal income and spending data are also due today. Consumer spending could be lower despite an increase in personal income for the month, according to the median estimates.

Economists forecast that personal income will rise 0.4% on the month. This follows a 0.1% increase in July. Personal spending is forecast to rise by 0.3% which is just half from July’s 0.6% increase.

PCE Price Index
PCE Price Index

The modest decline in the personal spending and income figures comes amid a weaker consumer sentiment for the month. The University of Michigan’s consumer sentiment index fell the most since 2012.

The cutback in spending comes as President Trump announced a fresh round of tariffs on China. It included a number of consumer goods as well. Today’s consumer income and spending data comes as it potentially influences the third-quarter GDP.

Various trackers are showing that the US economy will rise at almost the same pace as in the second quarter. The US economy remains resilient despite the fact that the projected growth rate will slow.

The most important aspect of this, however, is the US consumer. A slowdown in personal spending could potentially translate to weaker retail sales. The retail sales numbers for August showed a modest decline from the gains in July.

For August, headline retail sales rose just 0.4%. This is about half of the increase from the retail sales in July which was at 0.8%. Core retail sales, however, stayed flat during the period. Given the current data, it is quite likely that the third quarter GDP remain in line with the broader expectations.

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