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 9/26/07 For Aug 2007 | ||||||||||||
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Highlights
Durable goods orders in August appear at first blush to be very bad. But weakness is mainly in aircraft. Outside of aircraft, weakness largely reflects coming off a sharp increase in August and the two months on average are moderately positive. Durable goods orders posted a sharp 4.9 percent drop in August, following a 6.1 percent surge in July. August's decline was below the market projection for a 3.1 percent decline in new durables orders. Excluding the volatile transportation component, new orders dipped 1.8 percent in August, following a 3.4 percent jump the month before. Today's report can best be described as volatile-nothing new for the durables orders numbers. On average, July and August show continued modest growth in manufacturing.
Weakness in durables orders in August was led by transportation-specifically non-defense aircraft. Most industries declined in August but generally by less than July's surge. Industry categories declining in July were primary metals, down 2.9 percent; fabricated metal products, down 0.1 percent; machinery, down 5.0 percent; computers & electronics, down 2.1 percent; and transportation, down 11.2 percent.
The only major industry posting a gain was electrical equipment which rose 2.9 percent in August.
Within transportation, nondefense aircraft fell a dramatic 41.0 percent in August, defense aircraft increased 43.2 percent, and motor vehicles declined 6.2 percent. Each of these rose significantly the month before.
Aircraft orders pulled capital goods orders down in the latest month. Nondefense capital goods orders fell 12.6 percent in August, following a 4.8 percent increase in July. Excluding aircraft, nondefense capital goods orders slipped 0.7 percent, following a 0.9 percent gain in July.
Overall inventories of durable goods remained under control with a 0.1 percent decline, following a rise of the same magnitude the month before. Overall shipments reversed course partially with a 1.6 percent decline in August after a 4.0 percent jump in July. Shipments of non-defense capital goods remained positive but have moderated with a 0.7 percent rise in August, following a 1.0 percent gain in July. We are likely to see only a moderate gain in the equipment investment component in GDP for the third quarter.
Year-on-year, new orders for durable declined to up 4.0 percent in August from up 8.1 percent in July. Unfilled durables orders came in at up 21.9 percent year-on-year in August, compared to up 20.9 percent in July.
Today's report certainly looks troublesome at first glance. However, the durables numbers are some of the most volatile data for the U.S. on a monthly basis. In light of July's strong gains, August's weakness appears to merely reflect that manufacturing is neither as robust as July alone nor as worrisome as August by itself. Manufacturing appears to continue on a modest uptrend. But the durables numbers do indicate that we need to pay attention to the regional manufacturing surveys to ensure that we are not dipping into negative territory and hopefully are merely slowing.
Durable goods orders in July rose sharply with gains widespread. Durable goods orders jumped 5.9 percent in July, following a 1.9 percent partial rebound in June. Excluding the volatile transportation component, new orders posted a large gain, rising 3.7 percent in July following a 1.2 percent decline in June. Excluding defense, new durables orders surged 4.9 percent, following a 2.3 percent gain in June. Durables orders are very volatile on a monthly basis - even for the stripped down versions - and a partial reversal of the July numbers should not be a surprise. A negative number that more than offsets July is what would be worrisome.
New orders for durable goods Consensus Forecast for August 07: -3.1 percent
Range: -7.0 percent to +1.0 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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