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 7/25/08 For Jun 2008 | ||||||||||||
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Highlights
Durable goods orders in June were surprisingly strong, indicating that the manufacturing sector is showing more resilience than many believed. Durable goods orders jumped 0.8 percent in June, following a 0.1 percent rise in May. New orders for June were much better than expected as the consensus called for a 0.4 percent dip for the month. Excluding the transportation component, new orders rebounded a sharp 2.0 percent, following a 0.5 percent decline in May. For the latest month, strength was broad based.
Strength in overall orders included primary metals, up 5.1 percent; electrical equipment, up 5.0 percent; machinery, up 2.3 percent; fabricated metals, up 1.7 percent, and "other," up 1.1 percent.
Weakness was seen in communication equipment, down 4.4 percent; transportation, down 2.6 percent; and computers & electronics, down 0.5 percent.
In the latest month, capital goods orders slipped 0.9 percent, following a 1.7 percent boost in May. June's decline was primarily in the volatile aircraft component. Ex-aircraft, capital goods orders rebounded 1.4 percent after edging down 0.1 percent in May.
Turning to the key source data for business equipment in GDP, shipments of nondefense capital goods rose 0.5 percent in June after a dip of 0.3 percent in May and boost of 1.8 percent in April. The business equipment component of GDP is likely to be moderately healthy given the second quarter numbers for nondefense capital goods shipments.
Year-on-year, new orders for durable goods edged up to down 1.1 percent in June from down 1.4 percent in May.
Overall, the June orders data show manufacturing to be healthier than many believed. The lower dollar is continuing to keep this sector in positive territory and the odds have risen that the economy stays out of recession. Also, the Fed is being given a little more wiggle room to think about when to start raising rates.
On this mornings' news, interest rates firmed along with the dollar while pre-open equities headed up.
Durable goods orders have been volatile as usual but have been trending near flat in recent months. May's numbers fit right in with that trend coming in unchanged following a 1.0 percent dip the prior month. Most of May's strength was in aircraft orders as durables excluding transportation fell back 0.8 percent, following a 1.9 percent surge in April. April was revised down somewhat for both overall orders and ex-transportation. For the latest month, strength was in civilian and defense aircraft orders.
New orders for durable goods Consensus Forecast for June 08: -0.4 percent
Range: -1.0 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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