Economy

Durable Goods Orders Surprise with Dip in May

June 27, 2018

Durable goods orders fell unexpectedly in May, for a second consecutive month of decline. Orders for goods expected to last three years or more fell 0.6 percent following a revised 2 percent decline in April, according to the Commerce Department. The May dip should be looked at in relation to the upwardly revised April data, suggesting growth was still moderate for the month.

Core capital goods, orders minus defense and aircraft, dropped 0.2 percent in May, but April data was revised upwardly to an increase of 2.3 percent from 1 percent. Shipments of core capital goods, used to calculate equipment spending for GDP measurement, inched down 0.1 percent after a revised increase of 1.0 percent in May.

Order declines were broadly distributed over categories of goods. Transportation equipment fell 1.0 percent in May. Orders for autos and parts plummeted 4.2 percent for the largest decline since January 2015.

Said economists at Wells Fargo, “Durable goods orders slipped 0.6 percent in May. Core cap-ex orders disappointed, but a massive upward revision to April and growing backlogs point to business spending continuing at a decent pace.”

The May advance report on manufacturers’ shipments, inventories, and orders follows:

New Orders

New orders for manufactured durable goods in May decreased $1.4 billion or 0.6 percent to $248.8 billion, the U.S. Census Bureau announced. This decrease, down two consecutive months, followed a 1.0 percent April decrease. Excluding transportation, new orders decreased 0.3 percent. Excluding defense, new orders decreased 1.5 percent. Transportation equipment, also down two consecutive months, led the decrease by $0.9 billion or 1.0 percent to $86.1 billion.

Shipments

Shipments of manufactured durable goods in May, down following nine consecutive monthly increases, decreased $0.2 billion or 0.1 percent to $246.9 billion. This followed a virtually unchanged April increase. Transportation equipment, down two consecutive months, drove the decrease by $0.5 billion or 0.6 percent to $82.1 billion.

Unfilled Orders

Unfilled orders for manufactured durable goods in May, up six of the last seven months, increased $5.9 billion or 0.5 percent to $1,160.6 billion. This followed a 0.6 percent April increase. Transportation equipment, also up six of the last seven months, led the increase by $4.0 billion or 0.5 percent to $800.3 billion.

Inventories

Inventories of manufactured durable goods in May, up 18 of the last 19 months, increased $1.1 billion or 0.3 percent to $403.0 billion. This followed a 0.3 percent April increase. Transportation equipment, up five of the last six months, led the increase by $0.5 billion or 0.4 percent to $129.0 billion.

Capital Goods

Nondefense new orders for capital goods in May decreased $1.6 billion or 2.0 percent to $77.1 billion. Shipments increased $2.3 billion or 3.0 percent to $76.4 billion. Unfilled orders increased $0.7 billion or 0.1 percent to $714.5 billion. Inventories increased $0.4 billion or 0.2 percent to $176.6 billion. Defense new orders for capital goods in May increased $1.7 billion or 15.1 percent to $13.3 billion. Shipments decreased $0.5 billion or 4.4 percent to $11.5 billion. Unfilled orders increased $1.8 billion or 1.2 percent to $147.0 billion. Inventories increased $0.1 billion or 0.5 percent to $22.4 billion.

Revised April Data

Revised seasonally adjusted April figures for all manufacturing industries were: new orders, $496.0 billion (revised from $494.4 billion); shipments, $492.9 billion (revised from $492.8 billion); unfilled orders, $1,154.6 billion (revised from $1,153.1 billion); and total inventories, $666.9 billion (unchanged).