EmailDurable goods orders jumped 4.0% in July after falling an upwardly revised 1.3% (from -1.9%) in June. The Briefing.com Consensus expected durable goods orders to increase 1.9%.
As expected, transportation orders provided the bulk of the increase. Nondefense aircraft orders surged 43.4% in July after falling 24% in June. Most of these orders came from a 100 airplane deal struck between Boeing (BA) and AMR Corp.'s (AMR) American Airlines. Motor vehicle orders increased 11.5% in July.
Excluding transportation goods, new orders were up 0.7% in July after increasing 0.6% in June. This easily topped the consensus forecast of a 0.5% decline.
That headline level, however, is very misleading. The only sector besides transportation that showed positive growth was primary metals (+10.3%). Excluding transportation and primary metals, orders fell 1.1%, which was significantly worse than consensus expectations.
It is heartening for future manufacturing growth that primary metals, a necessary input for many manufacturing processes, was the leader in durable goods growth. However, the fact that every other sector took a substantial hit suggests that demand for finished goods has softened. If demand does not pick up in the coming months, there may be a wave of higher inventory levels amid lower sales growth.
After two months of gains, business investment tumbled in July as orders of nondefense capital goods excluding aircraft fell 1.5% in July. The drop brought business investment orders back to April levels. While any drop in orders is concerning, we are exerting caution in reading too much into a one-month decline.
