Aerospace & Defense

How Boeing Alone Can Swing Durable Goods

Airplane sales and defense orders have always been volatile, and that is true in good times and bad. These sales and other big defense contracts can create massive swings in the monthly reporting of durable goods. After all, large weapons systems and airplanes are among the most expensive items counted within the “big ticket” and long-lasting items that are purchased within the American economy.

The woes of Boeing Co. (NYSE: BA) are very well known, with airlines now unhealthy enough that they don’t want to pay for the 737-Max whether the troubled aircraft gets FAA recertification or not. Is there a case to be made that the order cancellation game may be coming to an end?

New orders for durable goods rose a sharp 11.2% in July, and the preliminary of a 7.3% gain in June was revised to a stronger 7.7% gain. Airplanes played a role here, and in America that means Boeing.

The durable goods report excluding transportation was still up in July, but just by 2.4%. The June preliminary figure of 3.3% growth outside of transportation was revised to a gain of 4.0%.

The Econoday consensus called for a gain of just 4.3% on the headline durable goods in July. And the consensus excluding transportation was expected to come in at just 2.0%.

There is also a core capital goods report that backs out the defense orders as well, and that figure showed a much more modest 1.9% gain in July. The figure for June was revised to 4.3% from the preliminary report of a 3.3% gain.

Net orders for commercial aircraft and parts rose to $4.2 billion in July, and this is being tied to a drop in cancellations of the 737-Max. After seeing 179 jets removed from Boeing’s order book in June, the July cancellations were just 52 planes. This may hardly sound like a success, but there was also a Pentagon order of $1.2 billion for new F-15EX jets made by Boeing.

The total dollars for July’s new orders of durable goods was $230.7 billion. The U.S. Department of Commerce showed that total transportation orders were up by $19.6 billion (35.6%) to $74.7 billion. Nondefense new orders for capital goods increased by $5.4 billion (10.2%) to $58.0 billion in July.

Shipments of all manufactured durable goods have now risen for three consecutive months, and they increased $16.6 billion (7.3%) to $244.0 billion. Shipments of transportation equipment rose by $12.6 billion (17.8%) to $83.2 billion.

Unfilled orders also posted a decrease. The Commerce Department showed that the rate of unfilled orders for all manufactured durable goods fell by $8.2 billion (0.8%) to $1.0844 trillion in July. The unfilled orders in transportation
equipment has now been down for five straight months, and this fell by $8.4 billion (1.1%) to $735.2 billion.

While the news looks better in durable goods, it is mixed for Boeing, and this is even on a day when there was more positive news about the Moderna COVID-19 vaccine trials. Boeing stock was last seen down 1.6% at $172.00 a share, despite a 0.75% gain in the S&P 500.