New Durable Goods Orders Fell Sharply in June on Reduced Aircraft Sales and Broader Weaknesses

The Census Bureau said that new durable goods orders fell sharply in June on reduced aircraft sales and broader weaknesses. New orders dropped from $229.0 billion in May to $219.8 billion in June, a decline of 4.0 percent. Moreover, on a year-over-year basis, sales have decreased by 6.4 percent since June 2015. This highlights the ongoing challenges in the sector over the course of the past 12 months or more. With that said, much of the decline in activity in June came from lower nondefense and defense aircraft orders, down 58.8 percent and 7.4 percent for the month, respectively. Note that airplane orders can often be choppy from month-to-month, especially for nondefense sales, with transactions often centering around large trade shows. Excluding transportation equipment, new orders for durable goods were off by 0.5 percent in June, with 3.6 percent decreases year-over-year. This indicated broader weaknesses in the sector, even if the declines were more modest than the headline number suggests.

Looking more closely at the various durable goods sectors, the data were mostly lower in June. The exceptions were motor vehicles and parts (up 2.6 percent) and electrical equipment and appliances (up 0.8 percent), both of which notched some gains. Those increases, however, were not enough to offset declining new orders aircraft sales, as noted above, and for computers and electronic products (down 2.2 percent), primary metals (down 1.3 percent), fabricated metal products (down 0.3 percent) and machinery (down 0.1 percent).

Meanwhile, durable goods shipments increased by 0.4 percent in June, rebounding from the 0.3 percent decrease seen in May. Nonetheless, the higher figure in this release was boosted by motor vehicles (up 2.7 percent), with transportation equipment orders up 1.4 percent for the month. Excluding transportation, shipments of durable goods declined by 0.2 percent. Indeed, the sector-by-sector breakdowns were mixed, but mostly negative. Shipments fell for fabricated metal products (down 0.7 percent), machinery (down 0.4 percent), electronic equipment and appliances (down 0.2 percent), computers and electronic products (down 0.1 percent) and other durable goods (down 0.1 percent). Beyond automobiles, other segments with higher orders in June were communications equipment (up 6.0 percent) and (primary metals (up 0.8 percent).

Since June 2015, durable goods shipments have fallen 2.0 percent, with a decline of 3.2 percent when transportation equipment were excluded.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, 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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