Orders for durable goods (that is, items built to last more than three years) climbed 7.3% from May to June, according to data released by the Commerce Department on Monday. This marks the second increase in a row, after new orders plunged 14.4% monthly in March, and then by 5.8% in April.
June’s gains seem to have beaten everyone’s expectations. A Wall Street poll predicted a 7.0% rise, while a survey of economists at the Wall Street Journal forecasted that orders would improve by 5.4%.
Of course, today’s news comes with the usual disclaimer that the momentum may not be sustainable, as coronavirus cases keep cropping up.
There are two really big numbers that stand out in today’s report. First, autos and parts gained 85.7% since last month, which pushed transportation orders up to 20% monthly growth and buoyed the headline number. Then, on the opposite end of the spectrum, civilian aircraft orders fell by 462.3%. It’s not a secret that air travel is suffering under the coronavirus pandemic. Yesterday, the Wall Street Journal reported that orders for airplanes are drying up.
Stripping order autos and airplanes lowers new order growth to 3.3%.
Core orders, which take out defense and transportation, also rose 3.3% on a monthly basis. This subcategory is a metric for business investment. What we see is that businesses are beginning to spend again, but not at pre-pandemic levels yet.
Primary metals, fabricated metal parts, and heavy machinery all improved, but demand for computers softened.