Durable goods orders rose a whopping 6.5% in June led by civilian aircraft orders. Econoday economists expected a 3.5% rise. Excluding transportation, however, durable goods orders only rose 0.2% vs the Econoday consensus of 0.4%. Rounding out the report, a commerce department revision took May from -1.1% to -0.1%.
Aircraft orders don’t dribble out day by day, they come in big monthly batches and an especially big one in June that masks otherwise mixed results. Total orders surged 6.5 percent to top Econoday’s consensus for a 3.5 percent gain and high estimate for 6.0 percent. But when excluding transportation equipment that includes a 131 percent surge in civilian aircraft, orders could manage only a 0.2 percent gain which is below the 0.4 percent consensus and just making the low estimate.
But tipping the balance back in favor of strength is a 1 point upward revision to May where the decline is now only 0.1 percent. The ex-transportation reading gets a 1/2 point upward revision to a 0.6 percent gain with core capital goods (nondefense ex-aircraft) really showing strength, now at plus 0.7 percent vs a small initially reported decline.
But the readings for June aren’t that great with core capital goods moving back into the negative column at minus 0.1 percent. Other areas of weakness include motor vehicles which have been suffering and where the June decline is a sizable 0.6 percent.
For the second-quarter as a whole, however, June’s non-aircraft weakness is offset by the big gains in May. And specifically for Friday’s GDP report, a 0.4 percent June rise in inventories will be a solid plus with a 0.2 percent rise for shipments of core capital goods, that follows 0.4 and 0.2 percent gains in May and April, a modest plus.
But for forward momentum, the weakness in June doesn’t point to building strength for July. Durable orders have not been consistently strong this year though there are more favorable aspects to today’s report than unfavorable with the second-half outlook for the up-and-down factory sector now a bit more upbeat.
Durable Goods Details
Detail Notes
- The above image is condensed from a Census Department table.
- New orders for civilian aircraft distorted the report
- New orders excluding transportation are about .1% each month on average
- Shipments are a plus for second quarter GDP
- The motor vehicle numbers point to an inventory build that is sure to cause problems in the third quarter
Mike “Mish” Shedlock
The orders post by the aircraft industry are the equivalent of UFOs. Unofficial flying orders. Here we are with record order books and yet Boeing has just announced a $2 billion reduction in sales (first half 2017 versus first half 2016) and Airbus a smaller reduction in sales. However cash flow is up. Poorer suppliers and workers.
“Unofficial flying orders.”
…
True. But I wouldn’t stop with aviation. Orders in general can be canceled … or revised away.
Look at today’s report for June 2016 Not seasonally adjusted.
total new orders … $232.844 billion
nondefense aircraft and parts new orders … $7.578 billion
And those numbers one year ago when initially reported?
total new orders … $241.569 billion
nondefense aircraft and parts new orders … $9.215 billion
https://www.census.gov/manufacturing/m3/historical_data/pressreleases/adv/2016/jun16adv.pdf
BAE flight control systems has frozen hiring and started laying off contractors. United Technology’s aerospace division has a buyout and hiring freeze in place. If too few buyouts are accepted, layoffs will take place soon after.
Anyone want to fund a small UAV (drone) startup? I have an idea but need a few aerospace engineers…
“The motor vehicle numbers point to an inventory build that is sure to cause problems in the third quarter”
…
Advance inventory report (June) out today. Motor vehicles and parts dealers inventories grew +0.7% month over month. +7.4% year over year.
https://www.census.gov/econ/indicators/advance_report.pdf
Wards forecasting another poor month for new vehicles sales. -2.5% year over year.
http://wardsauto.com/datasheet/wardsauto-us-light-vehicle-sales-inventory-forecast-july-2017
Something has to give.
You never know, the weakening USD might provide some export support…
Adjust for ShadowStats 9% consumer inflation.
I wouldn’t stop with aviation. Orders in general can be canceled or revised away…the weakening USD might provide some export support
…and when 60% of these aircraft orders are not closed/realized by next quarter?
Orders don’t mean anything – easily inflated data that can be easily adjusted (downward, of course) in a month or two.
Durables orders = “estimate” (heavily-pumped headline which gives markets a fake boost).
The inevitable downward revision will be ignored.
Wash. Rinse. Repeat.
Stop reporting bogus/garbage data, please.
Only post-revision data has credibility. Headline data has ZERO credibility.
Post-revision data has been awful for years, and these durable/aircraft numbers will suck, too, after the inevitable revisions are posted in a few months…
Reblogged this on John Barleycorn and commented:
Good to see
Let’s the good time roll! Trump did it 🙂