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Economy in Brief

U.S. Durable Goods Orders Missed Forecasts
by Tom Moeller July 26, 2007

The 1.4% rise in new orders for durable goods during June missed Consensus expectations for a 1.6% increase. Though the shortfall was only slight, the gain failed to make up for a 2.3% decline during May and other details within the report were soft.

During the last ten years there has been a 67% correlation between the y/y change in durable goods orders and the change in production of durable goods.

Orders for nondefense capital goods did jump 4.6% last month, but again the increase failed to make up the prior month’s 6.8% decline. And excluding aircraft & parts orders fell 0.7%, the fourth decline this year and it pulled the y/y change to a negative 2.4%. During the last ten years there has been an 84% 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.

Orders for computers & electronic products fell 4.6% (-3.2% y/y) after a 5.0% gain during May. Orders for just computers & related products fell 3.9% (-2.2% y/y). Primary metals orders dropped 3.6% (-3.3% y/y) after a 4.7% slide during May. And the 1.5% (2.8% y/y) increase in electrical equipment orders during June only recouped about half of the prior month’s 3.8% slip.

Shipments of durable goods fell 1.1% (-0.8% y/y) after a modest 0.6% increase during May. Less the transportation sector shipments fell 1.1% (-0.2% 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. The June decline reflected a 4.0% (-1.3% y/y) drop in shipments of computers & electronic products but a firm 0.7% (15.9% y/y) rise in shipments of machinery.

NAICS Classification June May Y/Y 2006 2005 2004
Durable Goods Orders 1.4% -2.3% -0.6% 6.3% 9.9% 5.3%
    Excluding Transportation -0.5% -0.2% -1.7% 7.6% 8.8% 7.9%
Nondefense Capital Goods 4.6% -6.8% 6.5% 10.6% 17.1% 5.7%
 Excluding Aircraft -0.7% -1.5% -2.4% 8.5% 11.1% 3.2%
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