The U.S. durables report beat estimates
The U.S. durables report beat estimates thanks to big upside September surprises for transportation and defense orders that extended big August lifts, and that allowed a 0.8% headline durable orders rise with a 0.1% ex-transportation increase that followed an August boost to 0.3% from flat. The equipment data were stronger than expected, mostly via upward August revision, while both shipments and inventories beat estimates. Analysts raised our Q3 GDP estimate to 3.2% from 3.1%, but trimmed our Q4 estimate to 3.0% from 3.1%. Analysts expect growth in real equipment spending of 8% (was 7%) in Q3 and 10% in Q4 after a 4.6% pace in Q2. Analysts expect a huge $97 B inventory addition in Q3 but a $34 B subtraction in Q4 that leaves a lean $27 B accumulation rate into year-end. Analysts expect a 0.5% September factory inventory rise with a 0.3% business inventory increase, given the 0.7% factory durable inventory increase. Analysts assume a 0.5% September factory orders rise with a 0.8% factory shipments increase, given an assumed 0.3% nondurable goods rise. The factory durable inventory-to-sales (I/S) ratio dropped to 1.60 in September from 1.61 in August and 1.63 in July, and the factory I/S ratio likely sustained the August drop to 1.34 from 1.35 in July.