EmailDurable goods orders fell 2.1% in June, which is the second decline in the past three months. The Briefing.com consensus expected orders to increase 0.5%.
While the durable goods report may seem weak on the surface, it is actually another sign that businesses expect the recent slowdown in demand to be only temporary. Strong growth was seen in primary and fabricated metal demand. These goods are typically used as inputs in more complex manufacturing processes. Even though orders for most final goods remained soft, manufacturers are stocking up on necessary supplies on the assumption that production may need to ramp up quickly. These data are confirming the strengthening long-term outlook found in the most recent Empire Manufacturing Survey and the Philadelphia Fed Business Outlook.
The big drop in orders was due to a drop-off in transportation goods orders. As the data from Boeing already showed, aircraft orders weakened significantly in June. This translated into a 28.9% decline in nondefense aircraft orders and a 20.5% drop in defense aircraft. The motor vehicle sector also remained weak, declining 1.4% in June after increasing 0.3% in May.
Outside the transportation sector, durable goods orders increased a modest 0.1% in June with almost all of the growth coming from metals demand. Excluding transportation, the consensus expected orders to increase 0.5%.
Demand for business capital was strained. Orders for nondefense capital goods excluding aircraft fell 0.4% in June after a 1.7% increase in May. Shipments, which factor into second quarter GDP, were up 1.0% in June and should provide a boost to GDP growth.
