Washington, D.C., USA: New orders for manufactured durable goods in June increased $2.5 billion or 1.0 percent to $251.9 billion, the U.S. Census Bureau announced today. This increase, up following two consecutive monthly decreases, followed a 0.3 percent May decrease. Excluding transportation, new orders increased 0.4 percent. Excluding defense, new orders increased 1.5 percent. Transportation equipment, also up following two consecutive monthly decreases, led the increase, $1.9 billion or 2.2 percent to $87.7 billion.
The consensus forecast from economists had expected new orders for manufactured durable goods in June to ncrease by 3%
Shipments of manufactured durable goods
Shipments of manufactured durable goods in June, up ten of the last eleven months, increased $4.1 billion or 1.7 percent to $251.6 billion. This followed a 0.2 percent May increase. Transportation equipment, up following two consecutive monthly decreases, led the increase, $3.1 billion or 3.8 percent to $85.3 billion.
Unfilled orders for manufactured durable goods
Unfilled orders for manufactured durable goods in June, up seven of the last eight months, increased $4.4 billion or 0.4 percent to $1,165.1 billion. This followed a 0.5 percent May increase. Transportation equipment, also up seven of the last eight months, led the increase, $2.4 billion or 0.3 percent to $802.3 billion
Inventories of manufactured durable goods
Inventories of manufactured durable goods in June, down following seventeen consecutive monthly increases, decreased $0.4 billion or 0.1 percent to $402.8 billion. This followed a 0.3 percent May increase. Transportation equipment, down following two consecutive monthly increases, drove the decrease, $1.8 billion or 1.4 percent to $126.9 billion.
Nondefense new orders for capital goods
Nondefense new orders for capital goods in June increased $1.8 billion or 2.3 percent to $78.6 billion. Shipments increased $1.8 billion or 2.3 percent to $78.4 billion. Unfilled orders increased $0.2 billion or virtually unchanged to $714.2 billion. Inventories decreased $1.7 billion or 1.0 percent to $174.8 billion. Defense new orders for capital goods in June decreased $1.6 billion or 11.6 percent to $12.0 billion. Shipments decreased $0.1 billion or 0.7 percent to $11.5 billion. Unfilled orders increased $0.5 billion or 0.3 percent to $147.7 billion. Inventories increased $0.4 billion or 1.9 percent to $22.9 billion.
Revised seasonally adjusted May data for all manufacturing industries
Revised seasonally adjusted May figures for all manufacturing industries were: new orders, $498.4 billion (revised from $498.2 billion); shipments, $496.5 billion (revised from $496.1 billion); unfilled orders, $1,160.7 billion (revised from $1,160.8 billion) and total inventories, $668.4 billion (unchanged).
Figures in text are adjusted for seasonality, but not for inflation. Figures on new and unfilled orders exclude data for semiconductor manufacturing. “Virtually unchanged” indicates that the change is less than 0.05 percent for a percent increase or decrease.
The Manufacturers’ Shipments, Inventories, and Orders (M3) survey or the Durable Goods Orders Report
The Manufacturers’ Shipments, Inventories, and Orders (M3) survey or the Durable Goods Orders Report provides broad-based, monthly statistical data on economic conditions in the domestic manufacturing sector. The survey measures current industrial activity – change in the total value of new purchase orders placed with manufacturers for durable goods – and provides an indication of future business trends.
The data can be volatile and revisions via the Factory Orders report released about a week later are not uncommon. Moving averages should be used to identify long-term trends.
Durable goods are generally defined as higher-priced capital goods orders with a useful life of three years or more
Durable goods are defined as hard products (capital goods) having a life expectancy of three years or more years, such as automobiles, computers, appliances, airplanes, semiconductor equipment and turbines.
The report is issued monthly by the Census Bureau of the U.S. Department of Commerce.
‘Actual’ greater than ‘Forecast’ is good for the dollar and vice versa. A weak durable goods report will also generally lead to a decline on the bond market.
Core Durable Goods Orders Report
Core Durable Goods Orders report measures change in the total value of new purchase orders placed with manufacturers for durable goods, excluding transportation items.
Orders for aircraft are volatile and can severely distort the underlying trend. The Core data is therefore thought to be a better gauge of purchase order trends;
Why Markets Care About Durable Goods Orders Report
It is a leading indicator of production – rising purchase orders signal that manufacturers will increase activity as they work to fill the orders.
A durable goods report showing an increase in orders is a sign that the economy is trending upwards. This can be a sign of gains in the stock market.
Durable goods orders tell investors what to expect from the manufacturing sector, a major component of the economy.
The Durable Goods Report gives more insight into the supply chain than most indicators, and can be especially useful in helping investors get a feel for earnings potential in the most represented industries: machinery, technology, manufacturing and transportation.
It provides forward-looking data such as inventory levels and new business, which count toward future earnings.
Other Economy News – ECB Maintains Status Quo After Announcing QE Exit Plan In June
The European Central Bank left its interest rates unchanged on Thursday and maintained the forward guidance on monetary stimulus, following the Governing Council’s June decision to halve the monthly asset purchases after September, and to eventually end them in December.
The main refi rate is currently at a record low zero percent and the deposit rate at -0.40 percent. The marginal lending facility rate is 0.25 percent.
“The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2 percent over the medium term,” the ECB said in a statement.
The bank reiterated its guidance for its asset purchases.
“The Governing Council will continue to make net purchases under the asset purchase programme (APP) at the current monthly pace of EUR 30 billion until the end of September 2018,” the ECB said.
In June, the ECB announced that it hopes to halve its monthly bond purchases to EUR 15 billion after September and to end them in December.
The latest policy decision was in line with economists’ expectations.
An end to asset purchases will be “subject to incoming data confirming the Governing Council’s medium-term inflation outlook”, the bank said.
Euro area annual inflation accelerated in June, exceeding the ECB’s target of “below, but close to 2 percent”.
However, core inflation that strips the effect of energy, food, alcohol and tobacco price changes eased to 0.9 percent from 1.1 percent in May.
The easing in core inflation shows that the ECB still has a long way to go, to say the least, ING Bank economist Carsten Brzeski said.
“However, do not expect the ECB to deviate from its June assessment. Rather, expect it to focus on the bright side of economic life.”
The ECB said it intends to reinvest the principal payments from maturing securities purchased under the APP for an extended period of time after the end of the net asset purchases.
ECB President Mario Draghi is set to hold the press conference at 8.30 am ET in Frankfurt.
“Listen out for hints about the shape of next year’s reinvestments – rumor has it that the Bank might focus on longer maturity bonds, which could limit the impact of the end of new purchases on longer-term yields,” Capital Economics economist Jennifer McKeown said.
Other Economy News – Goods Trade Balance
The U.S. Census Bureau announced the following international trade, wholesale inventories, and retail inventories advance statistics for June 2018:
Advance International Trade in Goods
The international trade deficit was $68.3 billion in June, up $3.6 billion from $64.8 billion in May. Exports of goods for June were $141.9 billion, $2.2 billion less than May exports. Imports of goods for June were $210.3 billion, $1.3 billion more than May imports.
The consensus forecast from economists had expected international trade deficit was $67.0 billion in June
Advance Wholesale Inventories
Wholesale inventories for June, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $632.5 billion, virtually unchanged (±0.2 percent)* from May 2018, and were up 5.1 percent (±3.9 percent) from June 2017. The April 2018 to May 2018 percentage change was revised from up 0.6 percent (±0.2 percent) to up 0.4 percent (±0.2 percent).
Advance Retail Inventories
Retail inventories for June, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $635.5 billion, virtually unchanged (±0.1 percent)* from May 2018, and were up 1.7 percent (±1.6 percent) from June 2017. The April 2018 to May 2018 percentage change was unrevised from the preliminary estimate of up 0.4 percent (±0.2 percent).