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 8/24/07 For Jul 2007 | ||||||||||||
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Highlights
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. July's gain was well above the consensus forecast for a 1.0 percent increase in new durables orders. 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.
Strength in durables orders in July was broad-based. Industry categories posting gains in June were primary metals, up 7.9 percent; fabricated metal products, up 1.4 percent; machinery, up 5.5 percent; computers & electronics, up 7.4 percent; and transportation, up 10.8 percent. The only major industry category declining was electrical equipment which was down 1.2 percent.
Within transportation, nondefense aircraft rose 12.6 percent, defense aircraft increased 15.8 percent, and motor vehicles rebounded 9.8 percent.
Nondefense capital goods orders rose 5.8 percent in July, following 6.4 percent boost in June. Excluding aircraft, nondefense capital goods orders rebounded 2.2 in July, following a 0.1 percent dip the month before.
Overall inventories of durable goods continued its low trajectory in July with a 0.1 percent rise, following no change in June. Inventories are a little on the tight side. Overall shipments rose 3.8 percent in July while unfilled orders increased 2.4 percent. Shipments of non-defense capital goods rebounded 1.4 percent in July, following a 0.5 percent decline in June, indicating a good start in the third quarter for the producers durable equipment component of GDP.
Year-on-year, new orders for durable jumped to up 8.1 percent in July from down 0.2 percent in June. Unfilled durables orders stood at up 20.9 percent year-on-year in July, compared to up 19.8 percent in June.
Today's report shows that the manufacturing sector had significant momentum heading into the financial turbulence of August. Bonds will not like the numbers but equities could go either way. Today's durables report lowers the odds of an imminent cut in the fed funds rate but helps to dispel fears of recession.
Durable goods orders rebounded 1.3 percent in June, following a 2.4 percent decline in May. New durables orders have been up in four of the last five months. Manufacturing has been one the bright spots in the economy lately and it is important for momentum in this sector to continue as housing is still declining and the consumer sector may be moderating.
New orders for durable goods Consensus Forecast for July 07: +1.0 percent
Range: +0.5 percent to +5.0 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. |
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