New Factory Orders Soared in June due to Strong Aircraft Sales

The Census Bureau said that new factory orders rose by 3.0 percent in June, up from $467.1 billion to $481.1 billion, rebounding from 0.3 percent declines in both April and May. This was the highest level since October 2014. Nonetheless, the bulk of that increase stemmed from a jump in nondefense aircraft and parts orders, up from $11.0 billion to $25.3 billion, likely centering around the International Paris Air Show. As a result, durable goods orders leapt 6.4 percent for the month, but edged up by just 0.1 percent with transportation equipment excluded. At the same time, nondurable goods orders were off by 0.3 percent in June, declining for the second straight month. Overall, new factory orders – which have struggled mightily over the past couple years – have largely trended in the right direction more recently, up 9.8 percent since June 2016. Excluding transportation, the gains were a still-healthy 6.9 percent year-over-year.

Looking specifically at durable goods activity in June, the data were mixed but mostly higher. Demand was stronger for furniture and related products (up 1.9 percent), machinery (up 0.4 percent), primary metals (up 0.2 percent), fabricated metal products (up 0.1 percent) and motor vehicles and parts (up 0.1 percent). In contrast, orders were lower for electrical equipment and appliances (down 2.1 percent) and computers and electronic products (down 0.2 percent). Core capital goods – or nondefense capital goods excluding aircraft – were essentially unchanged in June, but with a gain of 5.7 percent over the past 12 months.

Meanwhile, shipments of manufactured goods edged up 0.2 percent in June, pulling back from the 0.3 percent gain seen in May. Nondurable goods shipments were off by 0.3 percent for the month, with shipments of durable goods products flat. On a year-over-year basis, factory shipments have risen 4.1 percent since June 2016, or 4.5 percent with transportation 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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