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Economy in Brief

U.S. Durable Goods Orders Decline Unexpectedly
by Tom Moeller July 28, 2010

For June, weakness in durable goods orders was widespread. The advance figures from the Commerce Department indicated a 1.0% decline in orders overall, similar to May's 0.8% drop which was slightly shallower than reported initially. Nevertheless, the trend toward improvement in the factory sector continued. The latest decline compared to Consensus expectations for a 1.0% increase.

Transportation sector orders dropped 2.4% (+18.8% y/y) after a 6.6% May decline. Weakness was led by a 25.6% fall (+61.3% y/y) in orders for nondefense aircraft and parts. Offsetting that decline was a 2.9% increase (21.1% y/y) in motor vehicles & parts orders and a 6.5% increase (-24.0% y/y) in defense aircraft. Also to the downside were orders for computers & electronic products which fell 1.9% (+10.7% y/y), although declines were not widespread. In addition, primary metals orders were off by 2.0% (+39.6% y/y). To the upside was a 3.7% gain (19.9% y/y) in electrical equipment, appliance & components.

For the nondefense capital goods sector, overall June orders fell 1.6% after a 0.6% slip during May. Conversely, a 0.6% gain in orders less aircraft added to an upwardly revised 4.6% increase in May.

Shipments of durable goods slipped for the second month with a 0.3% downtick (+10.8% y/y). Weakness was pronounced for computers & electronics which fell 4.1% (+12.6% y/y) but that was offset by a 2.8% increase (5.9% y/y) in transportation equipment. Elsewhere, shipments were firm.

Inventory accumulation continued behind the improvement in orders & shipments. Durable goods inventories rose 0.9% (0.1% y/y) for the fifth consecutive strong monthly increase. Nevertheless, more increases may be on the way as inventories remained 10.7% below the late-2008 peak. Finally, backlogs of durable goods orders slipped marginally and were off 2.2% y/y.

The durable goods figures are available in Haver's USECON database.

What Is the Effect of Financial Stress on Economic Activity? from the Federal Reserve Bank of Kansas City is available here.

NAICS Classification (%) June May April Y/Y 2009 2008 2007
Durable Goods Orders -1.0 -0.8 2.9 15.9 -20.7 -9.0 9.7
   Excluding Transportation -0.6 1.2 -0.9 15.0 -18.4 -2.5 4.5
Nondefense Capital Goods -1.6 -0.6 8.1 20.3 -26.8 -12.6 17.5
   Excluding Aircraft 0.6 4.6 -2.8 15.8 -19.8 -4.2 5.3
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