Durable goods new orders increased as shipments declined in May

New orders for durable goods rose in May for the third straight month as companies continued to navigate rising interest rates.  

Seasonally adjusted new orders for manufactured durable goods landed at $283.1 billion in May, up 0.1% month over month after a revised 0.2% jump in April, according to the Monthly Advance Report on Durable Goods Manufacturers’ Shipments Inventories and Orders, released by the U.S. Census Bureau today. 

Seasonally adjusted shipments for manufactured durable goods were $284.7 billion, down 0.3% MoM. 

May’s seasonally adjusted value of core capital goods orders, excluding aircraft and defense equipment, was $73.6 billion, a decline of 0.6% MoM following a revised 0.3% growth in April. Seasonally adjusted shipments for core capital goods landed at $74 billion in May, down 0.5% MoM. 

The volatility in core capital goods orders signals continued equipment and manufacturing sector pitfalls, according to a Wells Fargo research note. 

“The monthly pattern of core capital goods orders has flip-flopped between negative and positive growth since the start of the year,” the note stated. “Orders … are now down a modest 0.2% over the past year, a clear sign that while the manufacturing sector has shown some recent signs of stabilization, a recovery remains some time off.” 

Core capital goods shipments also remain a concern, according to a Wells Fargo research note. 

“Core capital goods shipments (including aircraft) slipped 1.5% during the month, which was a bit weaker than we had penciled in,” according to the research note. “This, combined with upward revisions to first-quarter equipment investment suggests some downside to our estimate for real equipment spending to advance at around a 5% annualized rate in Q2.”

Unfilled orders, total inventories rise

Seasonally adjusted unfilled orders for durable goods totaled $1.4 trillion in May, up 0.2% MoM. Seasonally adjusted total inventories for durable goods finished at $530.1 billion in May, up 0.3% MoM. 

Meanwhile. seasonally adjusted unfilled orders for core capital goods reached $266.4 billion in May, down 0.2% MoM following a revised 0.2% drop in April. Seasonally adjusted total inventories for core capital goods hit $163.1 billion in May, up 0.1% for the second consecutive month. 

With the Federal Reserve signaling only one rate cut this year in a tight capital expenditure environment, durable goods and core capital goods are likely to remain at minor change levels, according to the Wells Fargo note. 

“We’re ultimately braced for a dull second half of the year in terms of capex demand and look for the industrial side of the economy to progress within its recent narrow range over the course of the year,” the research note stated. “Capex conditions are unfavorable, and even if the Fed is able to lower rates later this year, we’re unlikely to see a reprieve in terms of borrowing costs until next year.”