Thanks to motor vehicles and parts, factory orders rose 0.3% in September according to a Commerce Department report on Manufacturers’ Shipments, Inventories, and Orders.

The Commerce Department revised August from +0.2% to +0.4% also because of motor vehicles and parts, making the effective jump a substantial 0.5%.

The good news stops right there. Capital good and core capital goods new orders look ominous.

Capital Goods are tangible assets such as buildings, machinery, equipment, vehicles and tools that an organization uses to produce goods or services in order to produce consumer goods and goods for other businesses.

Core Capital Goods

Core capital goods orders, a leading indicator of future growth, are defined as non-defense, non-aircraft capital goods orders.

Core capital orders fell 1.3% for the month following an august revision from +0.6% to +1.2%. Core capital orders are a measure of business investment.

This report was widely expected, at least it should have been from the Advance Reports so there should be little additional impact on third quarter GDP, but there will be an impact that we have not yet seen.

Orders and Shipments

Spotlight on Autos

As shown in the above table, motor vehicles and parts are the bright spot in the report. But, with auto sales slowing a bit, incentives rising, and inventories bloated, manufacturers are playing with fire.

Core Capital Goods New Orders

Core Capital Goods New Orders Percent Change From Year Ago

Durable Goods New Orders

Motor Vehicles and Parts New Orders

Motor vehicles and parts are single-handedly keeping new factory orders afloat. Meanwhile, core capital goods new orders have collapsed, down 1.3% for the month and 3.9% from a year ago.

Mike “Mish” Shedlock