The Census Bureau reported that new durable goods declined 7.3 percent in July, a sharp decrease that followed three straight months of decent growth. New durable goods orders fell from $244.4 billion in June to $226.6 billion in July. The increase in June had been fueled by strong gains in aircraft orders, lifting the level of new orders back to where they were prior to the recession. But, airplane orders can be quite choppy from month to month, and they were off significantly in July. Even with July’s lower figure, new durable goods orders have risen 3.4 percent year-to-date.
The transportation sector also includes motor vehicles, with new orders in that segment up 0.5 percent for the month and year-to-date growth of 6.8 percent.
If you exclude transportation from the analysis, new durable goods were lower in July, but at a less dramatic pace, down 0.6 percent. Through the first seven months of 2013, sales have risen 1.1 percent, suggesting modest growth for durable goods sales outside of aircraft and motor vehicles.
Looking at other durable goods sectors, there were notable weaknesses in July in the electrical equipment and appliances (down 4.3 percent) and computer and electronic products (down 3.6 percent) sectors. These declines were somewhat counteracted, though, by higher monthly sales in the fabricated metal products (up 0.4 percent) and other durable goods sectors (up 0.3 percent). New orders in the primary metals and machinery sectors were unchanged in July.
Meanwhile, shipments of durable goods were down 0.3 percent in July, declining for three of the past four months. Year-to-date shipments have increased 1.1 percent, with year-over-year growth of 2.1 percent. As such, durable goods shipments have risen quite modestly over the past 12 months, a pace that we would like to see pickup moving forward. In July, increases in primary metals (up 1.5 percent), nondefense aircraft (up 1.3 percent), and motor vehicles (up 0.7 percent) offset declines in the defense aircraft (down 4.6 percent), computers and electronics (down 3.2 percent), and machinery (down 1.0 percent).
In summary, the headline number for new durable goods orders in July was heavily influenced by reduced aircraft sales for the month, but even when you exclude transportation from the analysis, the broader sector continues to experience weaknesses. While new orders and shipments have risen year-to-date, growth has been far from robust. This is further evidence that manufacturers need pro-growth policies that will enable them to flourish moving forward, helping the sector and the economy to finally build some momentum.
Chad Moutray is the chief economist, National Association of Manufacturers.