Durable Goods Weak in May -- Until You Look at the Core Reading

Economy

Published: June 23, 2015 9:00 am

Durable goods proved not to be all that durable for the U.S. economy in the month of May. The headline durable goods report was -1.8%, far worse than the consensus -0.6% estimate from Bloomberg, and still worse than the -1.0% expected by Dow Jones. Remember that, due to this reading being on large-ticket items from consumers and businesses, this is one of the most volatile of all economic readings from month to month.

Excluding transportation, durable goods rose by 0.5% in May. That met the Bloomberg consensus. You can thank lower airplane orders for that drop, although the summer air show may change that in the next month’s book of orders.

Excluding defense, May’s durable goods orders were in the red at -2.1%.

If investors and economic watchers want a core-durables view, that would be the durable goods orders for non-defense capital goods ex-aircraft. This measurement was up by 0.4% in the month of May.

Another sore spot for the economy was that April’s weak durable goods reading of -1.0% was revised to an even worse -1.5%. For the first five months of 2015, durable goods are roughly -2.2% from the prior year.

This may not be enough to overturn the apple cart for second-quarter gross domestic product (GDP) as of yet, but that effectively leaves only one more report for the second quarter. Two weak quarters in a row on the biggest of the big-ticket items might keep some wondering if that sudden snap back is going to be seen in the second quarter’s GDP report, due at the end of July.

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