New orders for durable goods jumped in July following a June revised contraction as transportation orders picked up while most other industries remained idle ahead of expected interest rate cuts and the 2024 elections.
Seasonally adjusted new orders for manufactured durable goods landed at $289.6 billion in July, up 9.9% month over month after a revised 6.9% drop in June, 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 totaled $291.1 billion, up 1.1% MoM following a 1.2% revision in June.
Excluding transportation, new orders for durable goods slipped 0.2% in July as most industries remained idle, according to a Wells Fargo research note. Year over year new orders excluding transportation grew 65 basis points, the lowest growth rate since January.
“The month-to-month volatility has been driven primarily by aircraft,” the note stated. “Today’s data confirm the ongoing trend that manufacturers are largely standing idle until looser policy comes to fruition and supports broad-based capital expenditures.”
Core capital goods orders slip
July’s seasonally adjusted value of core capital goods orders, excluding aircraft and defense equipment, was $73.6 billion, a dip of 0.1% MoM following a revised 0.5% rise in June. Seasonally adjusted shipments for core capital goods landed at $73.6 billion in July, down 0.4% MoM after a revision to no change in June.
Core capital goods shipments also remain a concern, according to a Wells Fargo research note.
“Excluding aircraft and defense goods, core capital goods shipments fell 0.4% in July after a flat reading to end Q2, pointing to a recent loss of momentum,” according to the research note. “We suspect a rebound in capital expenditures is coming as the Federal Reserve begins reducing its target range for the federal funds rate, but it will take some time for the accommodation of lower interest rates to filter through to the real economy.”
Unfilled orders, total inventories
Seasonally adjusted unfilled orders for durable goods totaled $1.4 trillion in July, up 0.2% MoM, following a 1.4% revised drop in June. Seasonally adjusted total inventories for durable goods finished at $529.7 billion in July, up 0.1% MoM after a 0.1% revised drop in June.
Meanhwhile, seasonally adjusted unfilled orders for core capital goods reached $266 billion in July, effectively flat MoM following a revised 0.1% dip in June, and seasonally adjusted total inventories for core capital goods hit $163.4 billion in July, up 0.2% MoM after a 0.1% increase in June.
The expectation is that the Fed will begin cutting interest rates in September, but that will have a lagging effect, especially ahead of the election and other geoeconomic and geopolitical concerns, David Teolis, chief economist at ACT Research, said during the ACT Research Seminar in Columbus, Ind., on Aug. 22.
“The Fed is to begin lowering rates in September, but policy will remain restrictive into 2025,” he said. “Manufacturing, housing and construction activity will follow the Fed cuts, but with an uncertain lag.”
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