Durable Goods Orders for June 2017

Durable Goods Orders for June 2017

Durable goods orders (DGO) surged in June 2017 according to the Census Bureaus, jumping 6.5 percent in the period.  This strong headline number followed a weak tally in May which was upwardly revised to minus 0.1 percent from minus 1.1 percent in the first estimate.  Year-over-year, this indicator increased 16.1 percent, the best reading since July 2014.  However durable goods required a special lift to reach its current level.

June’s DGO would have been much less enthusiastic without transportation’s contribution.  New orders for this segment jumped 19 percent in the period.  More specifically, aircraft orders soared 131 percent alone.  It is not every day that companies buy new planes or helicopters, so this is unlikely to be repeated in the months ahead.

Core orders within the report provide a more consistent look at how an important segment of the economy is faring because they exclude volatile components.  Unfortunately, these capital goods orders excluding aircraft and defense fell 0.1 percent in the period.  Additionally, the year-over-year trend decelerated to 5.6 percent from 6.0 percent a month earlier.

Atlas regards core orders as a proxy for business confidence.  Thus far, firms have not invested as if they are very enthusiastic during the current recovery.  In fact, the year-over-year rate of change in core orders was negative for 26 out 27 months ending in January of this year.  June’s deceleration suggests our economy may need to depend even further on consumers if the nation’s output growth is to move faster.  However, a more balanced mix of growth is preferred, so Atlas is rooting for more capital investment by firms.