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Highlights
The manufacturing sector sputtered in June, according to new durables orders. New factory orders for durable goods in June fell 1.0 percent, following a 0.8 percent drop the month before. The June numbers fell well short of market expectations for a 1.0 percent boost.
The June decline was led by the transportation component. Excluding transportation, new durables orders slipped 0.6 percent, following a 1.2 percent gain in May. Outside of transportation, major components were mixed, albeit net negative. Other than the fact that markets were disappointed that Boeing orders did not turn overall durables positive, the monthly trend is still upward, although volatile.
For the second month in a row, the big negative was the transportation component which fell 2.4 percent in June, following a 6.6 percent drop in May. Nondefense aircraft decreased 25.6 percent after falling 30.2 percent in May. Defense aircraft rebounded 6.5 percent. Motor vehicles continued a recent string of gains, rising 2.5 percent in June.
Other components were mixed. Declines were seen in primary metals, machinery, computers & electronics, and in "all other." Components gaining were fabricated metals and electrical equipment.
Nondefense capital goods orders excluding aircraft in June rose 0.6 percent, following a 4.6 percent spike the month before. Shipments for this category edged up 0.2 percent in June, following a 1.5 percent rise in May.
Year-on-year, overall new orders for durable goods in June were up 15.9 percent, compared to 15.2 percent in May. Excluding transportation, new durables orders came in at up 15.0 percent, compared to 17.8 percent the prior month.
On the news, equity futures slipped and Treasury yields edged down.
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Market Consensus before announcement
Durable goods orders in May declined a revised 0.6 percent after jumping 2.9 percent in April. Excluding the transportation component, however, new durable orders rebounded a revised 0.6 percent, following a 0.9 percent decrease in April. The big negative in the report was the transportation component which dropped 6.9 percent in May-tugged down by a 29.6 percent plunge in the volatile nondefense aircraft subcomponent. Advances were widespread in other components. Looking ahead, we may see some softening in the underlying trend for new orders. The new orders index in the ISM manufacturing report eased to 58.5 in June from 65.7 in May, with 50 being breakeven. But a rebound in aircraft likely will boost the headline number.
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