INSTANT VIEW: Durable goods orders plunge in October

NEW YORK (Reuters) - New orders for long-lasting manufactured goods plummeted in October as demand weakened across nearly every major sector and shipments faltered again, the Commerce Department reported on Wednesday

The number of U.S. workers filing new claims for jobless benefits fell by 14,000 last week, Labor Department data showed on Wednesday, but remained at levels consistent with a deteriorating labor market.

KEY POINTS:

DURABLE GOODS: * Orders for durable goods that are intended to last three years or more fell 6.2 percent, more than twice the 3 percent decline that Wall Street economists had forecast, after declines of 0.2 percent in September and 5.5 percent in August. * The October drop was the sharpest since an 8.3 percent plunge in October 2006. * Orders for nearly every category of durable goods declined, including drops of 12.6 percent for primary metals, 6.8 percent for machinery and 11.1 percent for transportation equipment. * Orders for non-defense capital goods excluding aircraft that are taken as a proxy for businesses' investment intentions fell 4 percent in October after decreasing 3.3 percent in September. * Shipments of finished goods also weakened in October, dropping by 2.4 percent after a 0.2 percent decline in September, in a signal that hiring at U.S. manufacturers are likely to keep dropping as factory output slows.

JOBLESS CLAIMS: * Initial claims for state unemployment insurance benefits were a seasonally adjusted 529,000 in the week ended November 22 from an upwardly revised 543,000 the previous week. * Analysts polled by Reuters had forecast 537,000 new claims versus a previously reported count of 542,000 the week before. * The four-week moving average of new jobless claims, a better gauge of underlying labor trends because it irons out week-to-week volatility, rose to 518,000 from 507,000 the week before, the highest reading since a matching 518,000 in January 1983. * Continuing claims eased to 3.96 million in the week ended November 15, the latest data available, from 4.02 million the prior week.

COMMENTS:

CARY LEAHEY, ECONOMIST, DECISION ECONOMICS, NEW YORK:

"Durable goods orders were much weaker than expected in October, telling you that the so-called capital spending - or business - recession is just starting to get underway while the consumer recession is well advanced. Capital spending tends to be a laggard in adjusting to harder economic times. While consumer spending may recover by the middle of next year, capital spending will be quite weak through the end of 2009.

"New jobless claims are in dark recessionary regions. You're still looking for a substantial decline in November payrolls to be released a week from Friday. Declines of 150,000 jobs or more are likely.

"The income and spending figures suggest a very strong consumer retrenchment which is highly unusual and this is yet another signal of the long awaited consumer pullback. In the last 10 years, the savings rate moved down to zero in reaction to easy money and rising asset values. Now that asset values have fallen and are falling and credit is harder to obtain, the savings rate should rise -- and quite significantly. If the savings rate jumps, it will be hard to get a strong consumer-led rebound in late 2009. This is the infamous paradox of thrift where in the long run we want to be savers, but in the short run the worst thing that could happen is that shoppers fail to go to the malls -- particularly in the next couple of days with Black Friday supposedly the heaviest shopping day of the year when retailers go into the black on profits for the year."

WILLIAM SULLIVAN, CHIEF ECONOMIST, JVB FINANCIAL GROUP, BOCA

RATON, FLORIDA:

"These data suggest the downward slide in economic activity is intensifying as the year comes to a close. The data are bad news across the board. Jobless claims are still well above half a million new claimants in the latest survey week. This is consistent with a step up in the magnitude of non-farm payroll declines.

"Another shoe is dropping on the economic scene: business fixed investment. That is a huge decline in durable goods orders.

"This demonstrates business planner caution and underscores the negative impact of the credit market turmoil. This shutdown in the credit markets is leaking over into the real economy."

STEVE GOLDMAN, MARKET STRATEGIST, WEEDEN & CO, GREENWICH,

CONNECTICUT:

"The numbers are falling a lot, and they have ever since September, when the equity markets went into a nose dive. Businesses have shut down and the consumer has basically frozen his wealth, and along with the credit market, we've seen an economic implosion. We're forecasting a very sharp decline in fourth-quarter GDP.

"As for the markets, investors should be bracing for these reports. They shouldn't be a big surprise to investors."

DANA SAPORTA, ANALYST, DRESDNER KLEINWORT, NEW YORK:

"I was most impressed by the large decline in durable goods orders, much weaker than the down 3 percent that we and the consensus were forecasting...It is indicative of a slowdown in business spending on plant and equipment. Such investment is likely to be a drag on GDP in the fourth quarter.

"We not only have consumers slowing down their spending but businesses as well, as companies adjust to slower demand.

"It could be that fourth-quarter GDP will be as weak as negative 4 percent.

"Initial jobless claims tell the same story of a very weak labor market. Claims did improve a little bit...but anything over 500,000 is quite weak for this claims figure.

"It's fairly clear that 500,000 is consistent with large declines in payrolls...we think non-farm payrolls could be down as much as 360,000 in November."

DAVID RESLER, CHIEF ECONOMIST, NOMURA SECURITIES INTERNATIONAL,

NEW YORK:

"The big standout is the drop in durable goods orders, that was much weaker than what I had expected. There is no question that the economy hit the wall in the aftermath of Lehman's failure -- that changed everything.

"Jobless claims are telling us that layoffs are proceeding at a high rate.

"I think it is shaping up to be a 4 percent decline in real consumer spending in the fourth quarter.

"Nothing in here really changes the big picture much."

SUBODH KUMAR, CHIEF INVESTMENT STRATEGIST, SUBODH KUMAR &

ASSOCIATES, TORONTO:

"The durable goods were weaker, unemployment was about in line. I think estimates for durable goods were higher because when the slowdown started, people thought consumers would be hurt more than manufacturing because of debt. People thought manufacturers would hold up better, but they've been hit hard, too. I think that's why the fed is following an aggressive policy of liquidity.

"In the past few days markets have moved up quite sharply, and I think volatility will remain as people ascertain what will go on in the fourth quarter. I look to these numbers to call a pull-back. Perhaps not to the levels of last week, but it will be a lot.

BORIS SCHLOSSBERG, DIRECTOR, CURRENCY RESEARCH, GFT FOREX, NEW

YORK:

"The durables is not a pleasant number. It's horrid across the board. I think that's pressuring stocks and the dollar/yen a little bit. But overall, there's not much to surprise the market here. Initial jobless claims were above 500,000 but were not worse than the last number, so any news that is not worse is considered relatively positive. It's all relative at this point."

SHAUN OSBORNE, CHIEF CURRENCY STRATEGIST, TD SECURITIES,

TORONTO:

"The durable goods report is the key here and this just adds to the dollar's negative momentum against the yen. Overall, the U.S. numbers this morning all have a negative tone to them and that should keep risk aversion higher. But I still think we're nearing a base here in euro/dollar because the dollar is looking overvalued. I think support in that currency pair is at $1.29. We may still get a little lower but judging from the reaction the last few days, the dollar's rally has been losing momentum."

MARKET REACTION: STOCKS: U.S. equity index futures extend losses after data shows slide in October durable goods. BONDS: Treasury debt prices extend gains slightly. DOLLAR: U.S. dollar falls versus yen. RATE FUTURES: U.S. short-term rate futures steady near day's highs after slide in durable goods.

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