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First Cut: July factory goods orders up on nondurables and durables

New orders for factory goods were up 1.4% in July from June on a solid 2.0% increase for durables and a smaller up 0.8% gain for nondurables. Durables was boosted by transportation orders which rose 7.0%, while excluding transportation overall durables were down 0.4%. Transportation benefited from relatively stronger orders for aircraft in July. Nondurables were higher on petroleum and coal products (up 2.4%) and beverages and tobacco (up 3.7%) which increases in prices for tobacco (up 8.8%) were particularly large.

The headline was slightly stronger than expected, but give the volatility of the series, not materially different from the median forecast. However, the headline looks less good in light of the decline in the new orders index in the ISM Manufacturing Report on Business for August which fell to 47.2, it first below 50 reading in three years.

“Core” durables orders — total durable orders less civilian aircraft and defense capital goods — were flat in July from June.

Unfilled orders were flat, an improvement after several months of declines related to cancellations of aircraft orders. Still, it points to less in the pipeline to keep activity going. Shipments were down 0.2%, mainly on softness in durables. Inventories rose 0.2%, a trend-like increase that suggests business have adapted quickly to signs of economic slowdown and are avoiding stocks piling up.

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