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Durable Goods: Aircraft Drive Headline But Core Gains Prove Modest

July 27, 2017
Bottom Line: Durable goods orders rose sharply as volatile civilian aircraft orders jumped in June. Ex-transportation orders rose by just 0.2%, less than expected as fabricated metal products increased while electrical equipment, computers and electronic products declined. There were positive revisions to May data, making the 2nd quarter look modestly more positive than the 1st quarter. Nondefense capital goods shipments ex-aircraft, proxies for equipment and software investment, are modestly above their Q1 level, suggesting that capital spending will likely make a small positive contribution to Q2 GDP growth.

Durable Goods Orders ROSE by 6.5% in June, compared with market expectations for an increase of 3.9%. Moreover, the prior month was revised higher from -1.1%to -0.1%.

Transportation Orders ROSE by 19.0% with civilian aircraft orders climbing by 131.2% while motor vehicle orders fell by 0.6%. Ex-transportation orders ROSE by 0.2%.

Core Durable Goods Orders, those excluding both civilian aircraft and defense, ROSE by 0.10% and are 5.7% ABOVE their year ago level.

Nondefense Capital Goods Shipments ROSE. Including civilian aircraft, they ROSE by 0.4% and excluding them they ROSE by 0.2%

Durable manufacturing inventories ROSE by 0.4%. Nondefense capital goods shipments ex-aircraft, proxies for equipment and software investment, are modestly above their Q1 level, suggesting that capital spending will likely make a small positive contribution to Q2 GDP growth.