A Drop in Plane Orders Sends Durable Goods Orders Down for July

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Friday, August 27, 2021

The U.S. Census Bureau’s durable goods orders fell 0.1% in July, according to the Commerce Department. Durable goods orders is a main economic indicator measuring current industrial activity.

The print is another way to look at the supply chain as goods orders provide insight into earnings in industries such as machinery, technology manufacturing and transportation. Durable goods numbers that are high indicates an economy on the upswing while a low number indicates a downward trajectory.

Hit by supply constraints, new orders for products meant to last at least three years decreased to a seasonally adjusted $257.2 billion in July as compared with June. Over the past year, durable goods have risen every month except for April and July 2021.

While the number dropped, the print was stronger than the consensus of -0.5%. The monthly average for 2021 has been +1.3%. Transportation orders brought the number down, while Non-Defense, ex-Aircraftorders — a well-known proxy for “normal” business spending, including office space and computers, was unchanged from the previous month. This marks the first non-improvement in business spending since the negative number registered in February.

As durable goods are expensive items that last three years or more, they are infrequent purchases, and examples include machinery and equipment, such as computer equipment, industrial machinery, and raw steel, as well as more expensive items, such as steam shovels and tanks. A significant component of durable goods are commercial planes, which not surprisingly, are not seeing a surge in new orders.

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