August 25, 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 dropped 6.8% in July to 229.2 billion, below expectations of a -5.8% change after June’s downward revision of 0.1%. New orders are still up 4.2% year-over-year. After taking out the hefty decrease in civilian aircraft orders of 82%, orders experienced a 0.2% increase. Core capital goods increased 0.4% in July despite expectations of a 0.5% increase. Motor vehicles suffered in July declining 1.2%.
Similar to June’s reading, extremely volatile civilian aircraft orders make it apparent to see how easy they sway durable goods orders as a whole. Removing transportation depicts a better picture of a healthy 0.5% month-to-month increase as well as a 5.6% year-over-year increase. Civilian aircraft orders were the main cause in July’s decrease but orders in computers, fabricated metals, and electrical equipment helped hold up durable goods. Durable goods provide an indicator of how industrial production and manufacturing will perform in the month to come.