Durable Goods Orders Show Biggest Increase In 2 Years

With orders for transportation equipment showing a substantial rebound, the Commerce Department released a report on Wednesday showing that orders for durable goods increased by much more than expected in the month of July.

The report showed that new orders for durable goods jumped 4.9 percent in July following a revised 1.3 percent decrease in June. Economists had expected orders to increase by 3.2 percent compared to the 2.2 percent decrease that had been reported for the previous month.

With the rebound, which marked the third increase in the last four months, durable goods orders rose at the fastest pace since July of 2007.

Nonetheless, the growth was largely due to a sharp rise in orders for transportation equipment, which increased by 18.4 percent in July after showing a notable 12.0 percent drop in June.

The rebound in orders for transportation equipment was due in large part to a 107.2 percent increase in orders for non-defense aircraft and parts. Orders for motor vehicles and parts showed a 0.9 percent increase.

Excluding the increase in orders for transportation equipment, durable goods orders increased by a much more modest 0.8 percent in July compared to a 2.5 percent increase in June. The increase came in below economist estimates of 1.0 percent growth.
The report also showed that shipments of durable goods increased by 2.0 percent in July following a 0.7 percent increase in June. Shipments of computers and electronic products had the largest increase, surging up by 7.4 percent.

At the same time, inventories of durable goods fell for the seventh consecutive month, falling by 0.8 percent in July following a 1.5 percent decrease in June.

The Commerce Department added that orders for non-defense capital goods, excluding aircraft, which is seen as a good indicator of business spending, edged down 0.3 percent in July after increasing by 3.6 percent in the previous month.

Commenting on the data, Lindsey Piegza, economic analyst for FTN Financial said, "Despite a surge in headline orders, a closer look at the details of the report reveal business spending remains weak as we move into the third quarter."

"Corporations are still leery about the sustainability of the economic recovery and are timid in reopening the spending spigots," Piegza added.

Next Wednesday, the Commerce Department is scheduled to release its July report on factory orders, which include orders for durable goods as well as orders for non-durable goods.

by RTT Staff Writer

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