Following the June surge, which led to a modest July drop, durable goods were expected to slow further by sliding -0.3% M/M, and moments ago we learned that indeed in August durable goods slid -0.2%, fractionally above expectations if still the biggest sequential drop since February, however on a YoY basis, growth rebounded back to double digits, rising 11.2% after July’s 9.2%.
The drop was largely due to a -1.1% decline in Transportation Equipment new orders. Ex-Transports, durable goods orders rose 0.2% MoM, in line with expectations.
There was better news in the value of Capital Goods New Orders Nondefense Ex Aircraft & Parts – a proxy for capital expenditure – which rose a solid 1.3% after an upwardly revised 0.7% advance; it beat the 0.2% expectation.
Also notable: while Nondefense aircraft and parts (i.e., regular airplanes) saw a -18.5% drop in new orders to $13.3BN, this was offset by a Defense 31.2% surge in Defense aircraft new orders, as the series jumped to the 2nd highest of 2022. Finally, the Ukraine war is paying off for the MIC.
So despite headline weakness, durable goods confirm a strong economy, suggesting the Fed will stay hawkish. That said, all of this data is nominal – not adjusted for inflation – so adjust your euphoria at the ‘economic’ strength accordingly.
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