Core capital goods orders rise in July, will it last?

Wells Fargo Research Team Wells Fargo

Summary

Despite a headline decline in July, durable goods orders is the first unambiguously positive development in months for the manufacturing sector. After accounting for pullbacks in aircraft and defense spending, there were broad-based gains in orders.

This isn't just tech-related spend

A headline decline of 2.8% was smaller than the 3.8% drop that was the consensus expectation. A separately reported drop in Boeing orders foreshadowed the second consecutive decline in aircraft orders; the July drop of 32.7% was smaller than the June decline. Defense spending also fell for a second straight month.

The more significant development in this July data is that underlying business demand is holding up better than expected. Motor vehicle and parts orders rose, if only incrementally (up 0.3%), but setting aside the volatile transportation sector, durable goods orders notched a 1.1% gain. That is the best monthly pick-up since September 2024.

Over the past year, we've emphasized how tech spending has been the main—and sometimes only—driver of business spending. That trend continued in today's report, with electrical equipment orders up 2.0% and computer-related orders rising 0.6%. Bookings for fabricated metals (+0.7), primary metals (+1.5%) and machinery (+1.8%) also posted gains in July. While one month doesn't make a trend, especially given tariff uncertainty in recent months, this rebound in old-line manufacturing categories played a key role in today's better than expected report.

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Wells Fargo Research Team

Wells Fargo

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