New orders for durable goods during July gained an impressive 5.9% and the gain during the prior month was revised up slightly to 1.9%. Consensus expectations had been for a 2.0% rise in orders for last month.

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.

The rise in new orders less the transportation category for July, however, was a less impressive 1.3% ... less impressive especially since it followed a 2.5% flop in June.

Changing new orders for motor vehicles & parts caused much of this volatility with a 9.8% rise last month after a 0.7% decline during June. And the aircraft sector got into the act with a 13.0% rise last month which was roughly a third of the 31.4% spike during June.

Orders for nondefense capital goods rose 5.8% during July following the 6.4% June increase which was revised up slightly. (Orders in May fell 6.8%.) Still, excluding aircraft & parts July orders rose a modest 2.2% following two months of decline The y/y change is roughly zero. 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 also have been volatile. They rose 7.4% (+1.8% y/y) after a little revised 2.8% June decline. Orders for just computers & related products fell 4.0% (-8.4% y/y) for the second month of sharp decline. Primary metals orders rose 7.9% (-0.5% y/y) but that only lifted orders back about to where they were in March. And electrical equipment orders fell for the third consecutive month (+0.2% y/y). Machinery orders were the strongest area with a 5.5% (4.4% y/y) increase following a 3.4% June gain.

Shipments of durable goods rose 3.8% (4.2% y/y) after a 1.1% June slip. Less the transportation sector, shipments made up declines during the prior two months with a 1.9% (1.3% y/y) increase. 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 July increase less transportation amounted to 1.9% (1.3% y/y).