It was the fourth increase in durable goods orders in the past six months -- and the gain over the past half-year provides additional evidence that an economic recovery is underway. Most economists expect the U.S. economy to show that an expansion started in the third quarter, with GDP increasing 2.5 percent to 3.0 percent. Commerce will release third-quarter GDP data on Thursday at 8:30 a.m. ET.
Economists surveyed by Bloomberg News had expected September durable goods orders to rise 1.5 percent. They fell a revised 2.4 percent in August and surged 4.8 percent in July. The ex-transportation rate fell a revised 0.4 percent in August and rose 0.9 percent in July.
In September, machinery orders surged 7.9 percent, and new orders excluding defense increased 0.5 percent. Also, shipments increased 0.8 percent and unfilled orders fell 0.4 percent.
Over the past 12 months, durable goods orders have now fallen 24.1 percent, which is indicative of a pronounced reduction in output. However, the rate of decline has clearly lessened in the past four months -- another sign of recovery.
Inventories are another key measure, and they fell 1.0 percent in September -- the ninth consecutive monthly decline -- as businesses continued to reduce supply to realign it with demand. However, that decreased inventory could boost GDP in the quarters ahead as businesses restock shelves to avoid being getting caught short as the recovery strengthens.
The durable goods figure measures new orders by stores and businesses for immediate and future delivery of factory hard goods. It's predictive of how busy factories are likely to be in the immediate months ahead for such items as refrigerators, washers and dryers, cars, computers and industrial machinery.
Investors should follow the statistic because rising durable goods orders usually indicate that businesses are experiencing sustainable growth in demand, which usually translates into higher revenue and increased production by the manufacturing sector -- two bullish signs for U.S. stock markets.
Economic Analysis: Put September's durable goods data in the category of an unqualified positive, one that U.S. stock markets should cheer. The data displayed broad-based strength: in nontransportation, capital goods, nondefense new orders, etc. The manufacturing sector is strengthening, and the U.S. economy is growing. However, investors should keep the incipient recovery in perspective: The nation has registered an enormous contraction in industrial capacity, and we'll need to see durable goods orders rise over many quarters to make up for the loss of output and jobs incurred during the nearly two-year recession.