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Economy in Brief

U.S. Durable Goods Orders Off Slightly
by Tom Moeller June 23, 2006

New orders for durable goods fell 0.3% last month after a little revised 4.7% drop during April. Consensus expectations had been for a 0.5% decline.

Lower Boeing orders dropped nondefense aircraft & parts bookings by 17.9% (-38.7% y/y) after a 29.7% decline during April. A partial offset to that decline came from a 2.5% (0.6% y/y) increase in new orders for motor vehicles & parts.

Less the transportation sector altogether durable goods orders recovered most of the prior month's decline with 0.7% gain.

During the last ten years there has been a 69% correlation between the y/y change in durable goods orders and the change in output of durable goods.

Dragged down by the decline in aircraft, orders for nondefense capital goods fell 1.9%. Less aircraft, these orders recovered half of the prior month's decline with a 1.0% gain. During the last ten years there has been an 86% correlation between the y/y change in capital goods orders less aircraft and the y/y change in business fixed investment in equipment & software from the GDP accounts.

Machinery orders jumped 2.3% (15.0% y/y) but electrical equipment orders slipped 0.2% (+13.4% y/y) after a 6.6% April spike. Primary metals surged 3.5% (22.2% y/y), surging for the third consecutive month. Orders for computers & electronic products fell 1.1% (+7.5% y/y) after a 10.8% April slump though computer orders alone rose 1.9% (1.0% y/y).

Shipments of durable goods jumped 2.6% (7.7% y/y) after a 1.2% April decline. Shipments less the transportation sector surged 1.8% (9.0% y/y). During the last ten years there has been an 82% correlation between the y/y change in durable goods shipments and the change in industrial production of durable goods.

Order backlogs rose another 0.6% (20.7% y/y) reflecting a 1.5% jump in nondefense aircraft & parts (59.4% y/y). Also strong was the 0.9% (14.3% y/y) rise in unfilled orders less transportation. The ratio of backlogs to shipments outside of transportation slipped moderately after surging in April.

Durable inventories rose 0.4% (3.3% y/y) after an upwardly revised 1.1% April increase. Less transportation inventories rose 0.3% (3.8% y/y) after two months of 1.0% gain. The inventory to sales ratio outside of the transportation sector gave back all of the prior month's increase.

NAICS Classification May April Y/Y 2005 2004 2003
Durable Goods Orders -0.3% -4.7% 3.3% 9.0% 6.4% -0.6%
    Excluding Transportation 0.7% -1.0% 9.8% 9.4% 7.6% -1.7%
Nondefense Capital Goods -1.9% -6.3% -1.7% 21.4% 5.6% -3.4%
 Excluding Aircraft 1.0% -1.9% 10.3% 12.3% 2.8% -2.0%
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