Durable Goods Not So Durable in May

Jon C. Ogg

If there is one economic report that is perhaps the most volatile of them all, that can disappoint in good times or can be high in bad times, it is the monthly durable goods report. The U.S. Department of Commerce reported on Monday that May’s reading on durable goods contracted by 1.1% to $228.2 billion. The consensus estimate from Bloomberg was −0.4%, but on top of this reading came a revision for April to −0.9% ($230.7 billion) from the preliminary −0.7% reading.

Orders for durable goods excluding transportation were up by 0.1%, but still shy of Bloomberg’s consensus estimate of a 0.5% gain. April’s reading was revised a tad lower to −0.5% from −0.4% reported on a preliminary basis. That ex-transportation figure has now been up for four of the past five reports.

While transportation orders are larger in size than most durable goods orders, the variations in orders on airplanes can greatly skew this monthly reading.

There is a core capital goods reading that came in at −0.2%, well under the broader consensus for a gain of 0.5%. Still, the April core reading was up 0.2% rather than a breakeven reading that had been reported on a preliminary basis.

There were some positive readings inside the May report. There was a 0.6% gain in machinery orders. Vehicles posted a 1.2% gain.

Inventories of manufactured durable goods rose 0.2% to $395.4 billion in May, and that is now up 10 of the past 11 months. There had been a similar gain in April. Computers and electronic products led the inventory increase with a 0.3% gain to $44.3 billion.

Nondefense new orders for capital goods decreased by $1.7 billion (−2.4%) to $68.3 billion in May. Shipments increased by $0.3 billion (0.4%) to $70.1 billion and unfilled orders decreased $1.8 billion (−0.3%) to $695.0 billion.

Each monthly durable goods report is subject to revision, and there are times that those revisions can be significant. Each of these Commerce Department reports are based on a panel of approximately 5,000 reporting units that represent approximately 3,100 companies from the manufacturing sector.