Factory Orders Surge, Thanks to Airplane Orders

By Jon C. Ogg Published Sep 3, 10:35AM EDT

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The U.S. Commerce Department’s report on factory orders for July was released on Wednesday, and the headline gain was a whopping 10.5%. Dow Jones had called for a gain of 11.0% and Bloomberg called for a gain of 10.9% for the month. The reason this number was so large is almost entirely due to aircraft orders from the annual airshow.

If you remove the volatile transportation and related equipment (aircraft and vehicles), then suddenly that gain disappears. Outside of transportation, the factory orders in July fell by 0.8%.

Shipments gained 1.2%, and there was a 1.4% gain for shipments of non-defense capital goods ex-aircraft. Unfilled orders were up by 5.4%, while inventories were up only 0.1%. There was a positive revision to June’s orders, up to 1.5% from a prior reading of 1.1%.

This is one of those economic reports that just look very confusing to many economic watchers. The headline number looks massive, but it is negative if you back out the big-ticket transportation items from autos and planes. Still, one can only assume that this bodes well for third-quarter gross domestic product (GDP).

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About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. www.247wallst.com.