Durable goods orders much weaker than forecast

Durable goods orders were much weaker than forecasts, rising only 0.3% in July despite a 13.1% jump in transportation orders (aircraft orders surged 33.8% and vehicle orders increased 5.3%). Excluding transportation, durable goods orders fell a sharp 3.8% in July.


The durable goods are things like waching machines and refrigerators. If people think that they are going to be long term employed, they can buy these things and not worry. Worry about losing a job takes away the disposition to buy these long term things. The reluctance to buy long term goods reflects anxiety about the economy.
Although durable goods orders are volatile and revision-prone (highlighted by the significant upward revision to these orders in June), this is obviously a disappointing report and is consistent with the message on new orders from recent regional manufacturing surveys (and the downshifting in order growth suggested by ISM new orders in July). Manufacturing orders appear likely to contribute less to growth in the third quarter—this is not atypical for this stage of the recovery as we note that a slowdown in order growth following a surge at the end of recessions was seen in the last three recoveries. The capital goods series bears watching, but we expect business equipment investment to continue to contribute to growth despite the decline in capital goods orders in this report—capital goods orders have fallen in the first month of each of the last nine quarters, then in most cases rebounded later in the quarter (which indicates a potential seasonal adjustment issue).


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