July 27, 2017 – Durable goods orders, which are orders to buy products that are expected to last at least three years, indicates how busy factories will be in the near future. As the name suggests, durable orders provide a look into demand for equipment along with other big-ticket purchases, such as vehicles and appliances. An increase in capital spending and consumer purchases indicates an increase in business investment and personal consumption in GDP.
New orders for durable goods spiked 6.5% in June to 245.6 billion, above expectations of a 3.5% change after May’s downward revision to -0.1%. New orders are now up 16.1% year-over-year. After taking out the hefty increase in civilian aircraft orders of 131%, orders experienced a slight 0.2% increase. Core capital goods decreased 0.1% in June despite expectations of a 0.3% increase. Motor vehicles suffered in June declining 0.6%.
June displays how extremely volatile civilian aircraft orders can shift durable goods orders for the month. When transportation is stripped out of the total orders, we see a much smaller increase of 0.2% month-to-month change and an increase to 6.8% year-to-year. High durable goods orders tend to indicate increases of industrial production and capital spending. Elevated durable goods orders also requires factories to stay busy filling these orders and gives an indication of how the manufacturing sector will perform.