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First Cut: New orders for durable goods pulled down by transportation in May

New orders for durable goods were down 1.3% in May from April, and April was revised lower to down 2.8% (previously -2.1%).

New orders in May were pulled lower by the transportation component where sharp declines in nondefense (-28.2%) and defense (-15.3%) aircraft were the main reason. Cancellation of aircraft orders were behind much of the downward revision to April.

Weakness in aircraft orders and cancellations were also the cause of declines for unfilled orders which were down 0.5% in May and 0.2% in April.

The decrease in orders in May was not unexpected due to Boeing’s reports of 0 orders for the month, as well as numerous cancellations of previous orders for its troubled 737 MAX aircraft. However, Boeing managed to ink a letter of intent with IAG for 200 of the 737 MAX aircraft at the Paris Air Show (June 17-23), a development that will improve the outlook for durables orders in June, especially with sales of motor vehicles improved.

Outside of transportation, orders were up a modest 0.3%, suggesting that there is some broader gains for overall orders. “Core” durables orders — orders less civilian aircraft and defense capital goods — dipped 0.1%, but hinted that recent declines were moderating and conditions improving.

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