May Durable Goods had a consensus expectation of +2.0%, and surged to a powerful +5.5%
However, all the upside action was courtesy of the Paris Airshow. The spike in Boeging’s sales of civilian aircraft orders (+165%) accounts for virutally all of the Durable Goods increase.
Orders for core durable goods fell by 0.8%; orders for nondefense capital goods (excluding aircraft) fell by 2.3%;
Orders for technology fell by 1.2% in May — a modest improvement after
April’s 6.0% drop. Computer orders fell by 7.0% . Communications
equipment orders slipped by 0.5%, agian an improvement from April’s
19.2% plunge. The biggest positive was inflation-adjusted orders for nondefense capital
goods (excluding civilian aircraft) were up by 4.9% in May — but even
this number reflects a drop off — after gains of 6.3% in April, 9.4%
in March and over 12% in the preceding two months, plus 4.9% reveals a
loss of momentum.
Overall, inventories of durable goods increased by 0.3% in May. MFR’s Josh Shapiro observes "results are consistent with the notion that an inventory correction is weighing on manufacturing output in Q2."
Back out Transports, and then what? We are left with Durable Goods of -0.2%.
What does this all mean? Expect another quarter of subdued capital spending growth, and commensurately modest GDP gains.
So much for that soft patch, huh?