New orders for manufactured durable goods in July fell $17.8 billion, led by a large decrease in transportation equipment, the Commerce Department reported today.
While overall durable goods orders fell 7.3%, the decrease was only 0.6% when transportation goods were excluded. Commercial aircraft and parts accounted for $14.5 billion of the decrease.
“Orders excluding transportation remain above 2012 levels but modestly so, by a muted 2.5%,” said Cliff Waldman, senior economist for the Manufacturers Alliance for Productivity and Innovation. “Providing further evidence of broad economic and manufacturing weakness, the demand for the output of key industry sectors that provide inputs into a wide range of manufacturing supply chains, such as primary metals, fabricated metals, and machinery, were essentially flat in July and have been weak since late spring.”
Shipments of durable goods in July also fell, by $800 million or 0.3% to $228.8 billion. Computers and electronic products, down three of the last four months, led the decrease, falling 3.2% to $26.6 billion.
Inventories of durable goods, up three of the last four months, edged up in July by $1.3 billion to $379.1 billion, a 0.4% increase.
Nondefense capital goods orders in July fell 15.4% to $78 billion.
“While following relatively strong gains in May and June, this important gauge of business willingness to invest is up by a modest 3.8%over 2012,” Waldman noted. “Such activity points to a defensive mentality on capital spending, doing only what is necessary to maintain the current level of growth but not operating with the type of aggressive entrepreneurial mentality that often underlies strong periods of U.S. economic performance.
Despite the weak July numbers, Waldman pointed to a number of encouraging signs for short-term manufacturing growth. “The protracted recession in the troubled Eurozone appears to have yielded to a weak recovery. The slowdown in large emerging market economies has bottomed. But there is little evidence of significant growth momentum in the U.S. and through much of the world. And the tepid environment, in turn, is constraining capital spending. All told, the world economic climate favors positive but moderate growth for the U.S. factory sector over the near-term.”