US: Durable Goods Orders below expectation in June, but Core Capital Orders hold up – Wells Fargo
|Data released on Tuesday in the US showed an increase in Durable Goods Orders by 0.8% in June, below market consensus. A positive note were the revisions to May’s numbers. Analysts at Wells Fargo point out the fourth consecutive monthly gain in core capital goods shipments highlights a sustained demand for long-lived durable goods and steady overall business spending.
Key Quotes:
“Durable goods orders came in weaker than expected in June with an overall gain of just 0.8%, well short of the 2.2% that had been expected, but the fact that prior month figures were revised higher takes some of the sting out of the miss. This was particularly true for core capital goods orders which came in closer to consensus estimates, rising 0.5% in June versus an expected 0.7% on the heels of an upward revision that lifted May's scant 0.1% gain to a respectable pick-up of 0.5%.”
“Defense spending has fallen in four out of five months amid the drawdown of U.S. military presence in Afghanistan and Iraq. However, the declines are being offset by a rebound in civilian aircraft orders.”
“Capital goods shipments also came in a bit lighter than expected, but not enough to derail our expectations for another strong quarter of equipment spending in the Q2 GDP report on Thursday.”
“While it will be tough to maintain the robust pace of the past year, we still look for equipment spending to remain strong in the second half of the year and grow in the mid- to high-single digits. Case in point: unfilled orders are up at a 9.7% annualized rate the past three months, the fastest pace clocked since the end of 2019.”
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