Aircraft bumped up orders and shipments of durable goods.

Aircraft bumped up orders and shipments of durable goods. 

 UPDATED -- Shipments and new orders for manufactured durable goods continue moving higher, with both hitting record levels, according to the U.S. Commerce Department – but the numbers may not be as bright as they seem, due to a high number of orders in one sector.

Shipments of these items designed to last three years or more increased 3.3% in July from the month before, the fifth gain out of the last six months. It follows a 1.2% increase in June. The numbers were led by a 7.9% gain in transportation equipment. Excluding transportation, shipments increased 1.4%.

New orders also posted the fifth increase out of the past six months in July, gaining a whopping 22.6% from the month before. That follows a 2.7% June increase. Like shipments, the orders number also was driven higher by transportation equipment, which skyrocketed 74.2% above June’s level due to a high number of aircraft orders.

Excluding transportation, new orders in July fell 0.8%. Excluding defense, new orders moved 24.9% higher.

Through the first seven months of the year, shipments of manufactured durable goods are 4.8% higher than during the first seven months of 2013, while new orders are 8.2% higher.

The headline strength masking underlying weakness, according to Sterne Agee Chief Economist Lindsey Piegza.

“The whopping headline increase will no doubt grab the market and media's attention but the underlying details of this morning's orders report tell a very different story. Aside from a surge in aircraft orders accounting entirely for the headline gain, business investment and all other sub-categories of orders showed weakness at the start of the third quarter, suggesting waning momentum in investment,” she said. “While aircraft and transportation orders in general tend to be volatile month-to-month, the underlying trend in business investment is much less choppy and appears to be simply holding steady, certainly not indicative of the upward trajectory expected by many who forecasted 3% to 4% growth in the economy as far as the eye can see.

Piegza said business are clearly still hesitant to invest in new equipment, structures and full-time employees.

Meantime, a separate report shows The Conference Board’s Consumer Confidence Index, which had increased in July, improved further in August, hitting its highest level since October 2007.

The index now stands at 92.4, up from 90.3 in July. The Present Situation Index increased to 94.6 from 87.9, while the Expectations Index edged down to 90.9 from 91.9 in July.

“Consumer confidence increased for the fourth consecutive month as improving business conditions and robust job growth helped boost consumers’ spirits,” said Lynn Franco, director of economic indicators at The Conference Board. “Looking ahead, consumers were marginally less optimistic about the short-term outlook compared to July, primarily due to concerns about their earnings. Overall, however, they remain quite positive about the short-term outlooks for the economy and labor market.”

The Conference Board found consumers’ appraisal of current conditions continued to improve through August. Those saying business conditions are “good” edged up to 23.9% from 23.3%, while those claiming business conditions are “bad” declined to 21.5% from 22.8%. Consumers’ assessment of the job market was also more positive but they were slightly less optimistic in August about the short-term outlook.

Update adds consumer confidence report and Piegza comments.

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Evan Lockridge

Evan Lockridge

Former Business Contributing Editor

Trucking journalist since 1990, in the news business since early ‘80s.

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