Durable goods orders reflect the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. The first release, the advance, provides an early estimate of durable goods orders. About two weeks later, more complete and revised data are available in the factory orders report. The data for the previous month are usually revised a second time upon the release of the new month's data. (Bureau of the Census, U.S. Department of Commerce) Why Investors Care
| Released on 6/27/07 For May 2007 | ||||||||||||
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Highlights
Durable goods orders partially reversed recent gains with a decline in May. Durable goods orders fell 2.8 percent in May, following a 1.1 percent gain in April and a 5.1 percent jump in March. The consensus had forecast a 1.5 percent drop in new durables orders for May. April was revised up, compared to the initial estimate of a 0.6 percent increase. Excluding the volatile transportation component, new orders declined 1.0 percent in May, following a 2.5 percent gain the prior month.
Weakness in durables orders in May was broad based. Industry categories declining in May were primary metals, down 3.6 percent; fabricated metal products, down 1.0 percent; machinery, down 1.6 percent; electrical equipment, down 3.9 percent; and transportation, down 6.8 percent. The computers & electronics component rose 1.8 percent.
Within transportation, nondefense aircraft dropped 22.7 percent, defense aircraft rose 9.8 percent, and motor vehicles increased 2.3 percent.
Nondefense capital goods orders fell 8.3 percent, following a 0.1 percent dip in April and 13.8 percent surge in March. Excluding aircraft, nondefense capital goods orders fell 3.0 percent in May, following a 2.3 percent rise in April and 4.6 percent boost in March.
Overall inventories of durable goods rose 0.2 percent in May, following a 0.4 percent boost in April. Overall shipments increased 0.4 percent in May while unfilled orders advanced 0.8 percent. A data source for the business equipment investment component in GDP, shipments of non-defense capital goods slipped 0.3 percent in May, following a 1.2 percent hike in April.
Year-on-year, new orders for durable goods fell to up 0.7 percent in May from up 3.4 percent in April. Unfilled durables orders were unchanged at up 20.0 percent year-on-year in May from the prior month.
Today's report shows a bump in the road for manufacturing in May. Clearly, weakness in new orders in May was broad based but followed two strong months before. Unfilled orders remain moderately high. Given more recent improvement in regional manufacturing surveys in June, it is too early to suggest that manufacturing is showing a trend in slowing but rather is coming off two strong months. The durables orders series is one of the most volatile economic indicators for the U.S. and should be seen in that context.
Durable goods orders advanced 0.8 percent in April, following a 5.1 percent boost in March. While housing's weakness has drawn out longer than many expected a few months ago, manufacturing seems to be gaining some strength and the durables report has been one such indicator suggesting this improvement. We also have seen more recent improvement in some of the regional manufacturing surveys such as Empire State and Philly Fed. But back to the durables report, markets will as usual sort out how much strength or weakness is in the transportation component which includes the very volatile aircraft component. Excluding transportation, new durables orders rose 1.9 percent, following a 1.6 percent advance in March. Markets expect a dip in May due to a decline in Boeing orders.
New orders for durable goods Consensus Forecast for May 07: -1.5 percent
Range: -3.8 percent to +1.2 percent
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Monthly fluctuations in durable goods orders are frequent and large and skew the underlying trend in the data. In fact, even the yearly change must be viewed carefully because of the volatility in this series. |
| 2007 Release Schedule | ||||||||||||||||||||||||||
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