Durable Goods Orders Down But Shipments & New Homes Sales Up In July

Orders for durable goods continue to disappoint, but shipments and new home sales are looking good.

This morning the U.S. Commerce Department reported orders for big-ticket items fell for the second straight month in July, dropping 0.6%, following a 2.6% drop in June (revised from the 2% previously reported).
In contrast, durable goods shipments, a more important barometer for trucking, increased 0.2% in July, following a 2.5% drop in June. Durable goods inventories fell 0.6%, the fourth consecutive month for declines. As companies whittle down inventories to be more in line with demand, freight shipments should increase.
The big winners in the durable goods shipments categories for the month were primary metals (+1.8%), fabricated metal (+1.2%), machinery (+1.5%) and motor vehicles (+3.9%) while shipments of communication equipment (-6.4%), semiconductors (-5.6%), aerospace (-5.7%) and electrical (-3.8%) were down for the month.
Much of the drop for the telecom and semiconductor industries was due to falling prices and overstates the decline in freight volume. Otherwise there was a broad upturn in industrial markets.
Newport Communications Senior Economist Jim Haughey says there is also evidence some parts of the country are seeing an upturn in the industrial sector while other regions may be starting to stall.
“The pattern of change suggests the Great Lakes industrial areas are experiencing a significant rebound in employment and income. California and New England may now be stalling with the continued weakness in the high tech sector."
Declining orders for durable goods in July were partially driven by a more than 4% drop in new orders for computer and high-tech products and follows a 12.4% decline in orders for semiconductors in June. In contrast, companies making communications products reported a more than 18% increase in orders, marking the biggest gain for this sector in 13 months.
In a separate report, also released from the Commerce Department this morning, sales of new homes in July continued to be strong, up 4.9%, following a revised increase from 1.7% to 2.8% in June.
That is positive news for trucking companies that haul construction materials, as well as for operations that move products that will go into these homes, since an increase is expected to drive up sales for such goods.