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October 25, 2017 By Peter Boockvar

Durable goods # sends 10 yr yield to 7 month high


Durable Goods

Core capital spending in September rose 1.3% m/o/m, above the forecast of up .3% and August was revised up by 2 tenths. The y/o/y gain is now 7% and maybe finally we are seeing the long awaited improvement in capital expenditures that has so eluded this recovery. There was no change in vehicles and parts orders m/o/m and are down .9% y/o/y as the industry continues to digest a peak in sales and high inventories. Orders for computers/electronics grew by 1.6% m/o/m and are up 7.1% y/o/y. This was driven by communications equipment as orders for computer products fell 5.5% m/o/m.  Electrical equipment orders though fell .1% m/o/m and are down 2.8% y/o/y. Relative to last year, orders for metals, both primary and fabricated, are up double digits coincident with higher commodity prices. Spending on machinery fell for a 2nd month but are still up almost 6% y/o/y. Also of note, shipments of core goods rose by .7% m/o/m vs the estimate of up .1% so this could lead to an uptick in Q3 GDP forecasts.

Bottom line, it’s great to see the rise in capital spending but as seen in this chart, we are not even at the peak in the last expansion in 2007 and remain below the high in 2014. A major driver of capital spending in 2018 could very well be the immediate expensing of capital expenditures vs the current depreciation schedule that should be part of the new tax bill.

CORE CAPITAL SPENDING ORDERS

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In response to the upside surprise in durable goods orders, the 10 yr yield has risen another 2-3 bps to 2.47% and is thus up on the year again at a 7 month high. The 5 yr is now up to 2.08%.

Filed Under: Latest Data

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About Peter

Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.

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Disclaimer - Peter Boockvar is an independent economist and market strategist. The Boock Report is independently produced by Peter Boockvar. Peter Boockvar is also the Chief Investment Officer of Bleakley Financial Group, LLC a Registered Investment Adviser. The Boock Report and Bleakley Financial Group, LLC are separate entities. Content contained in The Boock Report newsletters should not be construed as investment advice offered by Bleakley Financial Group, LLC or Peter Boockvar. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction or investment strategy. The views expressed in this commentary should not be taken as advice to buy, sell or hold any security. To the extent any of the content published as part of this commentary may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. No chart, graph, or other figure provided should be used to determine which securities to buy or sell. Consult your advisor about what is best for you.

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