The U.S. Department of Commerce has released its reading on durable goods for the month of June. Durable goods matter because they sum up what is happening in the big-ticket items that help make up U.S. gross domestic product. For a twist, the durable goods reports are also highly volatile from month to month, regardless of the overall economic trends from quarter to quarter.

June’s report, released on July 27, showed that new orders for manufactured durable goods fell by $9.3 billion to $219.8 billion. In percentage terms, this was a 4.0% drop. This decrease made for a drop for two consecutive months, following a 2.8% decrease in May. Another issue to consider is that the Brexit jolt in June may have altered some of the orders at the end of the month.

Bloomberg was predicting that new orders as a whole would be down only 1.3%, but the worst estimate from its Econoday reading was −3.6%. That means the headline disappointed on all counts. Dow Jones had a consensus reading of −1.4% expected.

Excluding transportation, new orders were down only by 0.5% in June. Excluding defense, new orders decreased 3.9 percent. This −0.5% reading was still worse than the −0.3% expected by Bloomberg.

As often occurs, it was the transportation equipment that led the decline here. This sector is highly volatile because the price of each unit is so high. Transportation orders were lower by $8.5 billion to $72.2 billion, or in percentage terms it was −10.5%.

Again, there seems to always be an exception on why durable goods numbers are so volatile. What is hard to write off here in this case is that this was the worst report in nearly two years (since August of 2014).

Shipments of manufactured durable goods rose by $0.9 billion, or 0.4%, to $232.5 billion, following a 0.3% drop in May. Shipments of transportation equipment, despite a weak headline in orders, managed to gain by $1.1 billion (1.4%) to $81.2 billion in June.

Inventories of manufactured durable goods have now been down in 11 of the past 12 months. The June reading was down by $0.7 billion (0.2%) to $381.5 billion.

Nondefense new orders for capital goods in June decreased $8.2 billion, or 11.3%, to $64.8 billion. Shipments were down $1.0 billion (1.3%) percent to $71.8 billion. Unfilled orders fell by $7.0 billion to $700.5 billion, and inventories were down $1.1 billion to $169.6 billion.

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What matters here is that the report came just hours ahead of the Federal Open Market Committee (FOMC) decision on interest rates. It is expected that the FOMC will be unanimous or close to unanimous in deciding to keep fed funds unchanged. In fact, most economists and fed funds futures are not predicting the next rate hike to come until the very end of 2016 — and some expect it delayed.

Stay tuned.

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