Durable Goods Orders Surge In June - July 25, 2013
Orders for durable goods rose strongly in June, led by sharp gains in the transportation sector. This volatile series, which is designed to measure demand across a range of high-priced consumer, industrial, and commercial goods that traditionally last for at least three years, tends to vary markedly from month to month.
The June gain, which easily topped expectations calling for an increase of just 1.9%, followed closely on the heels of May's upwardly revised gain of 5.2%. Initially, the May uptick had been estimated at 3.7%. Importantly, this was the third successive monthly rise in this series, and is another indicator of an economy that is slowing, but definitively, making its way forward as the second half of this year unfolds.
Meanwhile, the posted gain was driven almost entirely by a solid rise in the transportation sector. In fact, excluding transportation, orders were flat, but had been up 1.0% in May. Moreover, if we back out defense orders, durable goods saw a 3.0% increase in June, following a 4.9% gain in May.
Other sectors showing strength last month included machinery (up 2.4%), the aforementioned transportation sector (up a stellar 12.8%), motor vehicles and parts (gaining 1.3%), defense and nondefense aircraft (up 18.7% and 31.4%, respectively), and capital goods (gaining 9.0%). This last category increase is especially encouraging, as capital spending is a critical component of any late-stage business expansion.
Conversely, there was a drop in orders for primary metals products, computers and related equipment, communications equipment, and electrical equipment.
Still, notwithstanding such setbacks, and the outsized gain on the transportation front, this report must be seen as somewhat supportive to the economy, although given the mixed nature of this report, it is clearly not a game changer.
At the time this article was written, the author did not have positions in any of the companies mentioned.