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First Cut: June durable goods orders get a boost from nondefense aircraft after Paris Air Show

New orders for durable goods rose 2.0% in June from May, although some of the goods news was sapped by a sharp downward revision to down 2.3% in May (previously down 1.3%). Transportation orders helped boost the total with a respectable 1.2% rise from nondefense aircraft (up 75.5%) and a nudge from motor vehicles (up 3.1%) that more than offset a decline for defense aircraft (down 32.1%).

Boeing managed to get 9 new orders for commercial aircraft in June at the Paris Air Show after no orders in May and a scant 4 in April. However, order cancellations contributed to downward revisions in May. Also, cancellations of Boeing 737 MAX aircraft are reducing the number of unfilled orders on the books. Unfilled orders were down 0.7% in June after down 0.8% in May, driven by contraction in nondefense aircraft (down 0.8% in June and down 1.2% in May) and defense aircraft (down 2.1% in June and down 0.5% in May).

Outside of transportation orders, durables were up 1.2%. Orders were higher for machinery (up 2.4%), fabricated metals (up 2.1%), and primary metals (up 0.8%). Some of this may be another push to get ahead of possible tariffs should the present round of trade negotiation with China be inconclusive or fail. Some of it may be that businesses put off some purchases earlier this year and are playing catch up with materials and equipment to meet present demand.

The calculation for “core” new orders — orders less civilian aircraft capital goods and defense capital goods — was up 2.2% in June, also suggesting that orders are on the upswing after a few lackluster months.

Shipments increased 1.4% in June from May, and inventories were up 0.3%.

The above-expectation headline for orders will be welcome after heightened worries that the factory sector might not overcome the challenges of a slower global economy and uncertain trade and tariff policy.

 

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