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 8/27/08 For Jul 2008 | ||||||||||||
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Highlights
Durable goods orders in July were surprisingly strong-even after discounting a surge in aircraft orders. And businesses are looking past current weakness in the economy, continuing to invest in the economy. Durable goods orders advanced 1.3 percent in July, matching the 1.3 percent surge in June. New orders in the latest month topped the market forecast for a 0.1 percent advance. Excluding the transportation component, new orders increased 0.7 percent, following a 2.4 percent jump in June. Strength was moderately widespread. July's gain was the largest since a 4.1 percent surge in December 2007. Apparently, exports are still providing support for the manufacturing sector along with moderate a uptrend in equipment investment in the U.S., despite a slowing in consumer spending.
Strength in overall orders included primary metals, up 2.2 percent; machinery, up 4.6 percent; fabricated metals, up 0.4 percent; communications equipment, up 2.9 percent; and transportation equipment, up 3.1 percent.
Weakness was in computers & electronics, down 1.3 percent, and electrical equipment, down 6.0 percent.
Businesses are optimistic about a return in growth in demand, based on their willingness to sink dollars into capital goods. In July, nondefense capital goods orders jumped 6.3 percent, following a 2.6 percent drop in June. Even after excluding aircraft, nondefense capital goods orders rose 2.6 percent in July after a 1.3 percent gain in June.
Turning to the key source data for business equipment in GDP, shipments of nondefense capital goods rose 1.6 percent in July after gaining 0.5 percent the previous month. Despite many economists seeing a near flat third quarter for GDP, the business equipment component is off to a good start.
Year-on-year, new orders for durable goods declined to down 4.5 percent in July from down 0.7 percent the month before.
But in recent months, exports are still providing support for the manufacturing sector along with a moderate uptrend in equipment investment in the U.S., despite a slowing in consumer spending. Today's numbers should nudge interest rates up and provide lift to equities. However, for rates, there is some damping movement from comments by Atlanta Fed President Lockhart, making dovish comments that inflation will be coming down due to lower oil prices and a slowing economy.
Durable goods orders in June were surprisingly strong - even after discounting a bump up in aircraft orders. Durable goods orders jumped 0.8 percent in June, following a 0.1 percent rise in May. Excluding the transportation component, new orders rebounded a sharp 2.0 percent, following a 0.5 percent decline in May. But more recent manufacturing surveys suggest that manufacturing is flat.
New orders for durable goods, total, Consensus Forecast for July 08: +0.1 percent
Range: -1.0 percent to +2.2 percent
New orders for durable goods, ex-trans., Consensus Forecast for July 08: -0.3 percent
Range: -1.3 percent to +0.5 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. |
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