Durable Goods weak but core cap ex higher

June Durable Goods unexpectedly fell both headline and ex transports. Orders fell 1% vs an expected gain of 1% and fell .6% ex transports vs an expected gain of .4%. The core cap ex figure, non defense capital goods ex aircraft, though was a bright spot as they rose .6% after a 4.6% rise in May. Dragging down the ex transport # was a 2% drop in primary metals orders, 1.9% fall in computers/electronics and .7% decline in machinery. Electrical equipment orders rose 3.7% and fabricated metals gained 1.2%. Shipments, which get directly plugged into GDP, fell .3% after a .7% drop in May. Because inventories rose .9%, the inventory to shipments ratio rose to 1.58 from 1.56, the highest since Nov ’09. Net-net, core cap ex is now up 15.2% y/o/y on easy comparisons but it’s clear that manufacturing has been the bright spot in the economic recovery. However, as the headline # shows, including volatile aircraft, the improvement is still lumpy and not consistent.

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