U.S. durable goods orders plunged last month, reflecting the hugely disruptive impact of the September 11 attacks.

Orders were much weaker than expected in the month, down 8.5%. Shipments were off 5.5%.

Economists were way, way off on this call. They had predicted a drop of about 1.5%. The drop isn’t unprecedented by any means, but it was dramatic, and it cut orders to levels not seen for five years.

Seeking to salvage some credibility on this call, BMO Nesbitt Burns says, “The figures were at least consistent with our Q4 GDP forecast that calls for a 4% rate of decline.”

“Few industries went unscathed in September. Semiconductors continued to rebound from earlier weakness, while defense hinted at likely gains to come. Aircraft orders dried up, and there’s little prospect of a recovery in the commercial jet business ahead. Non-defense capital goods dropped 11.4%, a clear sign that business investment spending remains moribund in the face of massive excess capacity,” observes CIBC World Markets.

CIBC suggests that there won’t be a dramatic rebound in October, either. Some analysts have hoped that September results would be disrupted, but an equally outsize rebound would occur in October.

CIBC says yesterday’s Beige Book indicates that October was weak, too. “These data confirm that September was a write off for the U.S. economy, with manufacturing in a deepening recession. While that doesn’t alter our view of Q3 GDP, it does pose a serious question mark for Q4, where we are currently projecting a roughly 1% decline. Retailing seems to have regained lost ground, but if manufacturing keeps sinking, we might be forced to revise our Q4 outlook downward.”

BMO concludes, “The outlook for Fed easing continued to evolve with this report as markets are increasingly willing to build in a 50 basis point move in early November. We believe the Fed may well have to ease into next year.”