The 2.1% drop in June durable goods orders disappointed investors and contributed to yesterdays’ stock market retreat. However, the series is very volatile. Particularly volatile are civilian aircraft orders, which declined 28.9% during June. Also volatile lately have been automobile orders, which are actually the same as the industry’s shipments. They dropped 6.3% over the past three months, mostly because of a shortage of parts made in Japan.
Yet it is heartening to see that over the past three months through June, nondefense capital goods shipments excluding civilian aircraft rose 9.3% (saar) compared to the previous three months, to a new cyclical high. That’s up from March’s 3.9% increase. This augurs well for capital spending. Q2’s real GDP will likely show that capital spending on equipment and software rose faster than Q1’s 8.8% (saar).
Admittedly, durable goods orders were disappointing. However, they are volatile, as noted above. Nondefense capital goods orders excluding civilian aircraft rose 16.5% (saar) over the past three months through June compared to the previous three months. That’s not disappointing at all.