Durable Goods: When doing nothing is really something

Summary

Despite an upwardly revised surge in July durable goods orders, the payback decline that had been feared did not materialize in August with durable goods orders technically positive, but essentially flat. Excluding transport categories, durables orders had their best month of the year.

Stout gain for durables in August after excluding transports

In a cycle defined by diminished durable goods spending, and at a moment when falling interest rates are set to (at last) be supportive of future spending by lowering financing costs, the August durable goods report is largely better than expected. Setting aside the volatile transportation categories, durable goods orders rose 0.5%, enough to call August the biggest monthly gain of the year in terms of ex-transportation orders (chart).

Durable goods orders edged slightly higher August, a development that was something of a surprise after a major surge in July had most forecasters braced for give-back. Remarkably, the scant gain in August came despite a slight upward revision that lifted the July orders increase to 9.9%. An expected drop in civilian aircraft orders of 7.5% was slightly offset by an 8.0% pick-up in defense-related aircraft spending (chart). The non-defense aircraft category is much larger than defense spending.

Orders for motor vehicles and parts increased a bit in August, though the 0.2% gain here is not nearly enough to offset back-to-back monthly decline in the prior months.

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