Orders for Durable Goods Surge on Aircraft Demand
Orders for U.S. durable goods jumped in July by the most on record as bookings surged for commercial aircraft. Demand for business equipment eased after the biggest gain in seven months.
Bookings for all goods meant to last at least three years rose 22.6%, the Commerce Department said. A U.K. air show helped spark a 318% jump in plane orders, the most since January 2011. Orders for non-military capital goods excluding aircraft fell 0.5% last month after a June increase of 5.4% that was the strongest since November.
Prospects that demand will be sustained are giving companies reason to make larger investments in their operations. Persistent job growth that keeps households spending, along with a pickup in overseas markets, would help provide an added boost for manufacturers.
“When you get past the volatility of the aircraft, what you’re seeing is continued firming in core business spending,” said Tim Quinlan, an economist at Wells Fargo Securities. “The underlying trend here is ongoing moderate pace” of capital investment, he said.
The median forecast of 78 economists surveyed by Bloomberg News estimated total durable goods orders would climb 8%. June orders rose a revised 2.7%. Estimates ranged from a 0.5% gain to a 38.1% surge after a previously reported June increase of 1.7%.
The July gain in durables orders also reflected increased demand for automobiles. Bookings for motor vehicles climbed by the most since August 2009.
A boost in transactions for aircraft helped lift the overall goods figure. Boeing Co., the Chicago-based aerospace company, said it received 324 orders for planes last month, almost three times the 109 tally in June. The company’s reported deals picked up at the Farnborough Air Show in England last month.
Orders excluding transportation equipment decreased 0.8% in July after a 3% increase a month earlier.
Non-military capital goods excluding aircraft orders were projected to rise 0.2%. Such bookings are considered a proxy for future business investment.
Shipments of such goods, used in calculating gross domestic product, increased 1.5% in July after rising 0.9% the prior month, the report showed. The June reading had previously been reported as a 0.3% decline.
The data corroborate other surveys indicating factory activity has gained traction in recent months. The Institute for Supply Management’s index climbed in July to its strongest level since April 2011.
Business investment in equipment climbed at a 7% annualized rate in the second quarter, rebounding from a 1% annualized decline in the first three months of the year, according to the Commerce Department’s report on gross domestic product.
Motor vehicle assembly lines are humming as demand lingers near an eight-year high. Cars and light trucks sold at a 16.4 million pace in July, down from the 16.9 million the prior month that was the fastest rate since July 2006.
Some manufacturers are also getting a boost as housing shows uneven progress in rebounding from a slowdown earlier this year. Sales of previously owned homes rose last month at their strongest pace since September, according to data from the National Association of Realtors last week.
