New Durable Goods Fell in June on Weaknesses in Transportation Sector

By July 27, 2011Economy

The Census Bureau reported that new orders for durable goods fell 2.1 percent in June, more than offsetting the 1.9 percent rebound in May. The bulk of this decline stemmed from the transportation sector, with new orders for transportation equipment off 8.5 percent. Other sectors with monthly losses include capital goods (down 4.1 percent) and machinery (down 2.3 percent). The largest gains for the month were in the communications equipment (up 15.2 percent) and fabricated metal products (up 2.1 percent) sectors.

In contrast to new orders, shipments of durable goods rose 0.5 percent in June for the second month in a row. The increase was led by gains in shipments from non defense aircraft and parts (up 3.6 percent), primary metals (up 2.8 percent), and machinery (up 2.6 percent). The largest declines in durable goods shipments were found in the computer and electronic equipment (down 1.8 percent), defense capital goods (down 1.6 percent), and motor vehicles and parts (down 1.5 percent) sectors.

Inventories were up for the 18th straight month, with a 0.4 percent increase; meanwhile, unfilled orders increased 0.2 percent.

Overall, this report highlights continued weaknesses in the durable goods sectors, much as we have discussed before. The decline in new orders in June was dominated by decreased sales of civilian aircraft and a decline in auto production. Yet, even without those sectors, growth was flat. This release lends further credence to weak real gross domestic product data for the second quarter of 2011, which will be released on Friday.  I am expecting to see 1.3 percent growth for the quarter.

Moving forward, production in durable goods should pick up in the second half of this year. With that said, we will need to see more impressive growth in new orders in July and August if that is to come to fruition.

Chad Moutray is chief economist, National Association of Manufacturers.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM), where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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