May Durable Goods Surprise, Beat Forecast

The value of core capital goods orders – a proxy for investment in equipment that excludes aircraft and non-defense capital goods – expanded by 0.5% in May, accelerating from a 0.3% gain in April. Those orders were up 10.2% year-on-year (YoY) last month.

Core capital goods shipments, a figure that is used to help calculate equipment investment in the government’s gross domestic product report, rose 0.8% in May. Despite some boost from higher prices, shipments still showed strength after adjusting for inflation.

The broad-based gain in durable goods included strong bookings for primary metals as well as computers and electronic products. But orders for electrical equipment, appliances, and components fell 0.9%, while demand for fabricated metal products was unchanged.

The better-than-expected increase in core capital goods orders underscored underlying strength in manufacturing, which accounts for 12% of the economy, despite weak factory surveys.

Below is the May advance report from the US Census Bureau on durable goods manufacturers’ shipments, inventories, and orders:

New Orders

New orders for manufactured durable goods in May increased $1.9 billion or 0.7% to $267.2 billion, the US Census Bureau announced today. This increase, up seven of the last eight months, followed a 0.4% April increase. Excluding transportation, new orders increased 0.7%. Excluding defense, new orders increased 0.6%. Transportation equipment, up two consecutive months, led the increase, $0.7 billion or 0.8% to $87.6 billion.

Shipments

Shipments of manufactured durable goods in May, up twelve of the last thirteen months, increased $3.6 billion or 1.3% to $268.4 billion. This followed a 0.3% April increase. Transportation equipment, up seven of the last eight months, led the increase, $1.7 billion or 2.1% to $84.7 billion.

Unfilled Orders

Unfilled orders for manufactured durable goods in May, up twenty-one consecutive months, increased $3.7 billion or 0.3% to $1,109.8 billion. This followed a 0.5% April increase. Transportation equipment, up fifteen of the last sixteen months, led the increase, $2.9 billion or 0.5% to $639.8 billion.

Inventories

Inventories of manufactured durable goods in May, up sixteen consecutive months, increased $2.7 billion or 0.6% to $482.7 billion. This followed a 0.9% April increase. Machinery, up nineteen consecutive months, led the increase, $1.0 billion or 1.2% to $82.3 billion.

Capital Goods

Nondefense new orders for capital goods in May increased $0.4 billion or 0.5% to $83.7 billion. Shipments increased $1.3 billion or 1.6% to $79.8 billion. Unfilled orders increased $3.9 billion or 0.6% to $623.8 billion. Inventories increased $0.6 billion or 0.3% to $210.7 billion.

Defense new orders for capital goods in May increased $0.3 billion or 2.6% to $13.7 billion. Shipments increased $0.3 billion or 2.5% to $14.0 billion. Unfilled orders decreased $0.2 billion or 0.1% to $185.6 billion. Inventories increased $0.1 billion or 0.3% to $22.3 billion.

Revised and Recently Benchmarked April Data

Revised seasonally adjusted April figures for all manufacturing industries were: new orders, $534.8 billion (revised from $533.2 billion); shipments, $534.3 billion (revised from $532.1 billion); unfilled orders, $1,106.1 billion (revised from $1,106.8 billion) and total inventories, $787.9 billion (revised from $786.1 billion).

By David Schollaert, David@SteelMarketUpdate.com