- Durable goods orders to fade from strong June
- Business spending expected to decline slightly
- Retail sales suggest active consumer durable goods
The US Census Bureau will release its report on Manufacturers New Orders for Durable Goods in July on Monday August 27th, 12:30 GMT, 8:30 EDT.
Forecast
Durable goods orders are expected to rise 1.1% in July after June’s revised 1.9% gain-originally 2.0%. Orders outside of the transportation sector are predicted to be flat following June’s revised 1.0% increase-initially 1.2%. Non-defense capital goods orders excluding aircraft and parts, a commonly used indicator proxy for business spending, are thought to be flat in July after rising a revised 1.5% in June-originally 1.9%. Orders aside from Defense Department expenditures in June were revised down to 2.9% from 3.1%.
Durable goods
Durable goods are the government’s classification for long lived retail goods. Its products are designed to last three years or more in normal use. Items in this category extend from consumer durables like automobiles, exercise equipment and lawn mowers that may be replaced frequently to business investment purchases like electric turbines and commercial aircraft whose useful life may last in decades to office software whose utilization may not survive the next release.
FXStreet
Durable goods in business
The Census Bureau’s category, non-defense capital goods ex aircraft and parts, is essentially business durable goods purchases minus those generated by government defense spending and excluding commercial aircraft.
Business capital spending is an important cyclical component of GDP and an indicator of future economic activity. Businesses spend most liberally to replace aging equipment or expand capacity when they anticipate growth in consumer spending. The lead time may be anywhere from a few months to years depending on the type of business and the size of the investment.
Business sentiment
Business sentiment and spending has been deeply affected by the US trade dispute with China. Sentiment has fallen steadily in both the manufacturing and service sectors this year.
The overall purchasing managers’ index (PMI) in services dropped to 53.7 in July the lowest in three years and is down from last September’s 13 year high of 60.8.
FXStreet
Manufacturing’s PMI is yet weaker registering 51.2 in July also down from a 13 year top last August of 60.8.
FXStreet
Retail Sales and consumer sentiment
Consumer spending has been healthy in the past five months. The Census Bureau’s retail sales category rose 0.7% in July, more than double the 0.3% forecast and June’s 0.3% result. Over the last five months it has gained an average of 0.6%.
Likewise the control group which enters into the government’s GDP calculation jumped 1.0% in July, ahead of the 0.7% prediction and June’s 0.7% increase. These sales have measured 0.64% monthly in March through July’
Consumer sentiment has been buoyant supported by the still surging labor market. The Conference Board Consumer Sentiment Index of 135.7 in July was among the highest reading of the last two decades and was the second highest post-recession reading. Though the sentiment index is expected to drop to 130.0 when the August score is reported on the 27th that would still place consumer optimism above every reading from December 2000 to August 2018.
Reuters
Consumer satisfaction is a generally reliable guide to retail sales and though strong consumption is normally followed by business spending the US China trade dispute has severely inhibited business investment. The consumer is as yet, largely unaffected by the competing tariffs placed by Washington and Beijing.
The divergence between the active consumer and recoiling business will likely widen in July as the trade war between the world’s two largest economies has continued to deepen since the previous durable goods report.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800, as traders lack directional impetus amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold ends Q1 2024 at record highs, what’s next?
Gold is sitting at an all-time high of $2,236, lacking a trading impetus amid holiday-thinned conditions on Good Friday. Most major world markets, including the United States are closed in observance of Holy Friday, leaving volatility around Gold price highly subdued.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
US core PCE inflation set to ease in February on month as Federal Reserve rate cut bets for June mount
The core Personal Consumption Expenditures Price Index is set to rise 0.3% MoM and 2.8% YoY in February. The revised Summary of Projections showed that policymakers upwardly revised end-2024 core PCE forecast to 2.6% from 2.4%.