Econoday Economic Report: Durable Goods Orders July 29, 2009

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Durable Goods Orders

Released On 7/29/2009 8:30:00 AM For Jun, 2009

	Prior	Consensus	Consensus Range	Actual
New Orders - M/M change	1.8 %	-0.5 %	-1.7 % to 1.2 %	-2.5 %
New Orders - Yr/Yr Change	-23.3 %			-26.8 %
Ex-transportation - M/M	1.1 %			1.1 %
Ex-transportation - Yr/Yr	-22.4 %			-24.1 %

Highlights
New factory orders for durables in June dropped sharply, largely on a plunge in civilian aircraft orders. Durable goods orders fell back 2.5 percent in June, following a revised boost of 1.3 percent the month before. The decline in June was worse than the consensus forecast for a 0.5 percent dip. But excluding the transportation component, new durables orders advanced 1.1 percent, following a 0.8 percent gain in May.

The drop in new orders was led by transportation, down 12.8 percent. Within transportation, nondefense aircraft fell 38.5 percent, defense aircraft jumped 30.1 percent, and motor vehicles slipped 1.0 percent. The other notable decline for a major category was communications equipment which fell 10.8 percent. Weakness was also seen in fabricated metals, computers & electronics, and "other."

Showing gains were primary metals, up 8.9 percent; machinery, up 4.4 percent; and electrical equipment, up 0.9 percent.

Due to the fall in aircraft orders, nondefense capital goods orders declined 3.4 percent after a 9.1 percent surge in May. Excluding aircraft, the trend is still up as this component rose 1.4 percent in June, following a 4.3 percent boost the month before.

A positive for future production was another drop in durables inventories-which declined 0.9 percent in June after a 1.1 percent drop the prior month. Low inventories mean that at some point, manufacturers will have to boost production.

Year-on-year, overall new orders for durable goods slipped to down 26.8 percent in June from down 23.9 percent the previous month. Excluding transportation, new durables orders edged down to minus 24.1 percent from down 23.0 percent in May.

Today's report is primarily a negative for Boeing-not new news. Outside of transportation, orders were mixed but still continuing the gains from May. The new orders for durable goods series is notoriously volatile but the latest numbers still suggest that the recession in manufacturing may be ending soon-especially with inventories getting low.

Market Consensus before announcement
Durable goods orders in May came in unexpectedly strong - even after discounting transportation. Durable goods orders increased 1.8 percent in May, following a revised rebound also of 1.4 percent drop in April. Excluding the transportation component, new durables orders posted a 1.1 percent boost after dipping a revised 0.2 percent the month before. But we may see some slippage in June. Three major manufacturing surveys in June (ISM manufacturing, Philly Fed, and New York Fed) indicate modest contraction in new orders.

Definition
Durable goods orders reflect the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. The first release, the advance, provides an early estimate of durable goods orders. About two weeks later, more complete and revised data are available in the factory orders report. The data for the previous month are usually revised a second time upon the release of the new month's data. Why Investors Care

Monthly fluctuations in durable goods orders are frequent and large and skew the underlying trend in the data. In fact, even the yearly change must be viewed carefully because of the volatility in this series.
Data Source: Haver Analytics

2009 Release Schedule

Released On: 1/29 2/26 3/25 4/24 5/28 6/24 7/29 8/26 9/25 10/28 11/25 12/24

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