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US durable goods orders surge in July to record high

H.S. Borji
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US durable goods orders surge in July to record high

US durable goods orders soared in July to their highest level on record, led by a sharp rise in transportation equipment that was the byproduct of a spike in demand for Boeing jetliners.

Orders for manufactured goods meant to last three years or more increased 22.6 percent to $300.1 billion, following an upwardly revised gain of 2.7 percent the previous month, the Commerce Department reported today in Washington. The increase sent durable goods orders to their highest level since the data series was first published under the current North American Industry Classification System in 1992.

A median estimate of economists called for a gain of 7.5 percent.

Orders for transportation equipment surged 74.2 percent to $133 billion, largely a result of increased demand for Boeing jetliners. The aircraft manufacturer took 324 orders last month, the highest on record. That was more than triple the rate of its July 2013 orders.

Automobile orders increased 10.2 percent, a sign manufacturing activity was improving in the third quarter.

Non-defense capital goods excluding aircraft – a gauge of business spending – slipped 0.5 percent in July following a revised gain of 5.4 percent the previous month.

Excluding transportation equipment, durable goods orders declined 0.8 percent, following a 3 percent gain in June.

Excluding defense equipment, orders increased 24.9 percent.

Shipments of manufactured durables, up five of the last six months, increased 3.3 percent to $248.9 billion, the highest level since the series was first published under the NAICS system. Shipments of transportation equipment led the gains, rising 7.6 percent to $76.3 billion.

Unfilled orders for US durables, up 15 of the last 16 months, increased 5.4 percent to $1,158.5 billion, the highest level since the series was first published on a NAICS basis.

Nondefense capital goods orders surged 60.8 percent to $136.3 billion. Shipments of capital goods were up 1.4 percent, official data showed.

Durable goods inventories increased 0.5 percent in July, another record high under the current data collection regime. Weak inventory growth was partly responsible for the sharp contraction in gross domestic product in the first quarter. Latest figures on business and wholesale inventories suggested second quarter growth estimates would have to be revised downward.

The Commerce Department is scheduled to post revised second quarter GDP figures on Thursday. The advance estimate last month suggested the US economy accelerated at an annual rate of 4 percent in the second quarter, following a revised 2.1 percent contraction in the January-March period.

Today’s figures supported the view the US manufacturing sector was gaining traction at the start of the third quarter. The Institute for Supply Management’s gauge of US factory activity climbed in July to 57.1, its highest level since April 2011. The headline PMI was up 1.8 percent over the previous month.

Seventeen of the 18 manufacturing industries reported growth in July, led by higher levels of production and new orders. This in turn helped fuel another solid month of job creation at US factories.

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