US durable goods orders drop on vehicle demand

Edward Bell - Senior Director, Market Economics
Published Date: 28 October 2021


  • US durable goods orders fell in September, dropping by 0.4% m/m largely down to a decline in transport orders. Vehicle production globally has been impacted by a shortage of semiconductors and orders for motor vehicles were down almost 3% in September. Weak activity in the transport sector will weigh against the potential for any positive contribution from investment going into the final quarter of the year even as core capital goods orders managed to gain a seventh month in a row.
  • In the UK, the chancellor Rishi Sunak delivered his autumn budget statement providing an increase in spending of GBP 75bn over the duration of the current government’s mandate. Health, social care and education will receive the priority of the new funding. Nevertheless, the UK government projects that the country’s fiscal position will actually improve as higher inflation diminishes the apparent size of government debt and as faster growth boosts tax revenue. The Office for Budget Responsibility expects GDP growth of 6.5% this year (up from 4.0% previously), and 6.0% growth next year (down from 7.3% previously). Recently announced tax increases will also help to fund the additional spending.  Other highlights from the budget include a higher minimum wage, a freeze on petrol duties and tax breaks for those on benefit payments. 
  • The Bank of Canada kept interest rates on hold at its meeting overnight but will bring its expansion of purchases of government securities to an end. The BoC also signaled to markets that they could start to raise rates by April as Canada’s economy, like many other, grapples with the impact of currently high inflation. Governor Tiff Macklem highlighted specifically that “rates don’t need to be as low for as long” in order to get a full recovery.
  • The Bank of Japan kept policy unchanged as expected but also downgraded their inflation expectations for 2021 to 0% from 0.6% previously. They also lowered their outlook for growth in 2021 and anticipate a slowdown to trend levels in 2022-23.
  • Saudi Arabia is reportedly targeting as many as 7,000 international firms to establish operations or headquarters in the country, according to material coming out of a major conference underway in Riyadh. According to the head of the Royal Commission for Riyadh City, more than 40 firms had received licenses this week to operate in the kingdom.

Today’s Economic Data and Events

11:55 GE Unemployment rate Oct: forecast 5.4%

15:45 EC ECB deposit facility rate: forecast -0.5%

16:00 GE CPI y/y Oct: forecast 4.4%

16:30 US initial jobless claims Oct 23: forecast 288k

16:30 US GDP annualized Q3: forecast 2.6%

Today EG CBE deposit rate: forecast 8.25%

Fixed Income

  • The flattening of the UST curve continued apace overnight as investors prepare for imminent move higher in short-term rates. Yields on 2yr USTs rose more than 6bps to 0.50% overnight and are pushing higher in early trade today while the 10yr dropped almost 7bps to a yield of 1.5413%. Expectation that central banks will tighten policy and choke off inflation could help to support longer-term bonds although we still expect to see yields pushing higher again before the end of the year.
  • Emerging market bonds were mixed overnight though a broad index of USD-denominated bonds gained. In local markets, South Africa remains the notable outlier with yields up sharply, gaining 24bps to 10.07% overnight while Indian 10yr bonds staged a modest gain as did Turkish 10yr bonds.
  • Fitch Ratings affirmed their ‘AA’ rating on Abu Dhabi with a stable outlook.
  • Qatar Energy, formerly Qatar Petroleum, is preparing a framework to allow it to issue green bonds that could be worth up to billions of dollars.


  • Markets moved against the dollar after a few days of gains with the DXY index falling 0.16% overnight. USDJPY provided much of the adjustment ahead of today’s BoJ meeting although no change in policy is expected. USDJPY sank 0.3% to 113.83. EURUSD closed marginally higher, settling at 1.1603 while GBPUSD didn’t show much reaction to the government’s spending projections, falling 0.16% to 1.3745.
  • Commodity currencies showed strength overnight with CAD benefitting from a hawkish tilt from the BoC. USDCAD fell 0.25% to 1.2359 while both AUD and NZD ended the day stronger.


  • Equity markets turned red overnight with major indexes in the US posting losses. The S&P gave up 0.5% while the Dow fell 0.74%. In Europe, the EuroStox index managed to scrap away with losses of less than 0.1% while the FTSE fell 0.33%.
  • In Asia, the Nikkei is down by nearly 1% in early trading today while the Hang Seng is up by almost 0.2%.
  • Regional markets were nearly uniformly negative with the DFM edging lower, the Abu Dhabi exchange falling by 0.6% and the Tadawul giving up 0.3%.


  • Oil prices recorded their first sizeable drop in some weeks as markets revaluate the prospect of uninterrupted gains in oil amid a still shaky economic outlook. Brent futures fell 2% to USD 84.58/b while WTI dropped 2.4% to USD 82.66/b. Both contracts have already lost more than 2% in early trade today.
  • Data from the EIA showed a decent increase in commercial crude stocks, up by 4.3m bbl last week although there were reasonable draws in gasoline. US oil production held stable at 11.3m b/d last week as the slow but steady pace of increases remains intact. There was a large drop in product supplied, however, with gasoline and diesel demand down considerably.
  • Energy markets will also respond negatively to news from Russia that Gazprom will send additional gas to storage sites in Europe in November, helping to alleviate some of the near-term pressures in power markets.

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