Economic News Blog
Posted by: Steven Kline, Jr. 7. July 2016

Durable Goods Orders Continue to Grow

(Positive) Real durable goods new orders in May 2016 were $227,297 million. Compared with one year ago, durable goods new orders were up 4.4 percent, which marks the third time in four months that orders have increase compared with one year ago. Of those three months, May's rate of growth was the fastest. Also, it was the fastest rate of growth since July 2014, although that month's growth was abnormally affected by an extreme spike in aerospace in orders. As a result, the annual rate of change, now -2.2 percent, has reached its slowest of contraction since it began contracting in July 2015. The rate of contraction is likely to continue to decelerate in the upcoming months.

Motor vehicle and parts orders increased at a rate of 1.3 percent compared with one year ago for the second month in a row. That was the 17th straight month that MV&P orders increased. However, it was the slowest rate of month-over-month growth since orders contracted in November 2014. The annual rate of growth has decelerated to its slowest rate of growth since May 2014. If there is going to be an improvement in overall durable goods orders, then other industries will need to start picking up the slack in MV&P orders.

Aerospace orders increased for the second straight month. After increasing 27.2 percent last month, new orders inccreased 91.5 percent in May compared with one year ago. While aerospace orders are notoriously volatile it is important to remember that in May they were just 25 percent of the total MV&P orders. This was the sixth time in eight months that aerospace orders increased. In four of those months the rate of growth was more than 22 percent. The annual rate of change has contracted at a significantly slower rate as a result. One reason the annual rate is still contracting was the abnormally large order total from July 2014, which is significantly impacting the annual rate of change at the moment.

We use real durable goods new orders to forecast activity in metalcutting job shopsmetalworking, and durable goods.

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