June 2018 Durable Goods Orders

Durable goods orders were strong in June 2018 according to data from the Census Bureau.  This indicator measuring wares expected to last three years or longer rose 1.0 percent to end the first half of the year.  This monthly uptick was a welcome reversal from the prior two periods which encountered shrinking orders. 

Rising transportation equipment orders moved the needle forward in June.  This segment of the report needed the 2.2 percent lift because even with this large uptick it is down 6.2 percent versus a year ago.  Government spending helped the transportation segment as defense aircraft and parts jumped 20.2 percent on the heels of a 36.1 percent boost in May. 

Atlas’ favorite segment of this report improved once again, suggesting the economy has further room to run in the current expansion.  Core capital goods orders (which excludes defense spending and aircraft) rose 0.6 percent after gains of 0.7 percent and 2.0 percent in May and April respectively.  This is seen as a proxy for business confidence since it requires firms to part with large sums of cash or commit to years of financing in order to purchase such expensive capital equipment.  This string of gains indicates firms are feeling good about the future and expect to be adequately compensated for their investment.

From the vantage point of durable goods orders, the American economy looks strong.  Capital outlays tend to hug the contours of the business cycle.  Right now, they are increasing, thus adding to the body of evidence which points to further growth for the American economy.