Durable Goods Orders Declined in June, Surprising Analysts
That was in sharp contrast to the predictions of economists surveyed by Bloomberg, who had expected June durable goods orders to increase 1%, after a revised 0.8% decline in May and a 2.9% gain in April.
Durable goods orders are new orders by stores and businesses for immediate and future delivery of factory hard goods. These orders measure how busy factories are likely to be in the months ahead manufacturing such items as refrigerators, washers and dryers, cars, computers and industrial machinery.
Industrial Core Slowed in Second Quarter
With June's declines, the ex-transportation, three-month moving average for durable goods orders fell to -0.1% -- a stat that further confirms a slowing recovery in the U.S.'s core industrial sector. Also, excluding defense, durable goods orders fell 0.7% in June.
In addition, durable goods shipments fell 0.3% in June, and 1.3% excluding transportation shipments. That was the second straight monthly decline for the delivery component. Shipments fell 0.7% and 0.2% ex-transportation in May, respectively.
In June, transportation orders fell 2.4%, capital goods declined 2.3%, primary metals decreased 2%, computers and electronic products declined 1.9%, manufacturing fell 1.3%, and machinery dipped 0.7%. However, orders for electrical equipment and appliances rose 3.7%, and fabricated metals rose 1.2%.
Heading for a Double-Dip Recession?
High or rising durable goods orders usually indicate that businesses are experiencing sustainable growth -- demand -- which usually translates into higher revenue and increased production by the manufacturing sector -- two bullish signs for the U.S. economy.
But June's durable goods order report was a near across-the-board disappointment: The data further confirm that demand for industrial products declined in the second quarter.
Further, the industrial slowdown unequivocally shows that the economic recovery lost momentum in the second quarter because, to this point, the manufacturing sector has been a key driver of the expansion. Should the manufacturing slowdown continue, that would increase the probability of a double-dip recession, unless some other dimension of the U.S. economy -- such as business investment or consumer spending -- picks up to replace that lost commercial activity.