A big drop-off in orders for autos and aircraft paved the way for a decline of 2.4 percent in July's durable goods orders, the Commerce Department said Thursday.
The pullback in the volatile durables report comes on the heels of two consecutive monthly increases, including a 3.5 percent increase last month, and was worse than economists' projection of an unchanged reading in July.
Demand for transportation equipment fell 9.6 percent, including a 10 percent drop in new orders for commercial aircraft and parts and a 7 percent decline in orders for motor vehicles and parts.
“The 2.4 percent decline in new orders for durable goods reflects the fundamental weakness in the motor vehicle and parts industry this year and the short-term volatility of the aircraft and defense industries,” said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI. “Consumer demand for motor vehicles is very volatile month-to-month but it is not expected to grow this year or next. Commercial aerospace demand, on the other hand, fell in July but has strong fundamentals and orders are up 32 percent in the first seven months of this year versus one year ago."
Defense new orders for capital goods in July surged 15.1 percent, while nondefense new orders for capital goods increased 0.2 percent.
Shipments of manufactured durable goods in July decreased 1.3 percent, while unfilled orders for manufactured durable goods, up fourteen of the last fifteen months, increased 1.4 percent in July, to $630.7 billion. This was at the highest level since the series was first stated on a NAICS basis in 1992 and followed a 1.7 percent June increase.
Inventories of manufactured durable goods rose by 1.0 percent in July.
“The really good news in today’s durable goods report is that orders for non-defense capital goods excluding aerospace were up 1.5 percent in July and are up 10 percent so far this year compared to the same period one year ago,” Meckstroth said. “This indicates that business equipment investment is continuing to show strong growth.”