Durable Goods: Positive Revisions And Stronger Headline Hold Trend Steady

Bottom Line: Durable goods orders fell less than expected in May and positive revisions in machinery and computers and electronics boosted April data, pushing total order growth to a 4.5% annualized rate in the last three months. Looking at the past 12 months, hardgood orders have increased at a 9.2% annualized rate. At the core level the pace of acceleration moderated in the last 3 quarters, but the overall growth remains 6+% annually. Looking at the April and May average of nondefense capital goods shipments ex-aircraft, proxies for equipment and software investment, we see growth is just over 3% above its Q1 level, suggesting that capital spending will have a positive Q2 impact on GDP growth. Durable Goods Orders FELL by 0.6% in May, compared with market expectations for a decline of 1.0%. Moreover, the prior month was revised higher from -1.7%to -1.0%. Transportation Orders FELL by 1.0% with civilian aircraft orders dropping by 7.0% while motor vehicle orders fell by 4.2%. Ex-transportation orders FELL by 0.3%. Core Durable Goods Orders, those excluding both civilian aircraft and defense, FELL by 1.09% and are 6.3% ABOVE their year ago level. Nondefense Capital Goods Shipments ROSE. Including civilian aircraft, they ROSE by 3.0% and excluding them they FELL by 0.1% Durable manufacturing inventories ROSE by 0.3%. The April and May average of nondefense capital goods shipments ex-aircraft, proxies for equipment and software investment, is modestly above its Q1 level, suggesting that capital spending will have a positive Q2 impact on GDP growth.