U.S. Durable Goods Orders Surprised on Upside in May

New orders for durable goods unexpectedly rose 1.7% m/m (5.4% y/y) in May after an upwardly revised 1.2% monthly gain in April (initially +1.1%). The Action Economics Forecast Survey had looked for a 0.7% monthly decline. Shipments of durable goods also rose 1.7% m/m (3.4% y/y) in May, more than reversing their 0.6% m/m decline in April.

Transportation orders made another significant contribution to the rise in overall orders in May. They were up 3.9% m/m (17.7% y/y) on top of an upwardly revised 4.8% monthly gain in April (initially 3.7% m/m). A 10.8% m/m gain in orders for aircraft and parts provided a major boost to overall transportation orders. The May increase reflected a 32.5% m/m jump in nondefense aircraft orders but a 35.4% m/m drop in defense aircraft orders. Orders excluding transportation increased 0.6% m/m in May, offsetting their 0.6% m/m decline in April (revised down from -0.3% m/m). The May monthly gain in ex-transportation orders was the largest since March 2022.

Across other sectors, the rise in orders in May was relatively widely spread with increases in all major categories except fabricated metal products where orders were unchanged in May. The weakness in defense aircraft orders pushed total defense orders down 13.3% m/m in May. Excluding those, the remaining orders rose a robust 3.0% m/m in May following a 0.5% monthly decline in April.

Shipments of all manufactured goods edged up 0.2% m/m (-2.0% y/y) in May following three consecutive monthly declines. Shipments of durable goods jumped 1.7% m/m while shipments of nondurable goods fell 1.2% m/m, their fourth consecutive monthly decline. As for orders, transportation shipments played a key role in the increase in durables shipments, rising 4.6% m/m in June after a 1.5% m/m decline in April. Excluding transportation, other shipments of durable goods increased 0.4% after having declined in each of the preceding three months.

Capital goods information contained in this report provides important information concerning business spending on equipment. Orders for nondefense capital goods excluding aircraft increased 0.7%m/m (2.1% y/y) in May following a downwardly revised 0.6% monthly increase in April (initially 1.3% m/m). Core capital goods shipments have historically been a reliable coincident indicator of business spending on equipment. They rose 0.2% m/m in May following a 0.4% monthly increase in April (revied down slightly from 0.5%). The April/May readings combined point to a 1.4% annualized increase in core capital shipments thus far in Q2, down from 2.3% in Q1 and an indication that the Federal Reserve’s aggressive tightening of monetary policy is slowing business capital spending.

Inventories of all manufacturing industries unexpectedly fell 0.2% m/m (+0.5% y/y) in May after a 0.3% m/m increase in April. This was the third monthly decline in the past four months and points to a further drag from inventories on the overall economy. Inventories of durable goods increased 0.2% m/m in May while inventories of nondurable goods fell 0.9% m/m, their fourth consecutive monthly decline.

Unfilled orders of durable goods increased 0.8% m/m (5.6% y/y) in May, the same monthly gain as in April.

Manufacturers’ orders and shipments of durable goods, as well as nondurable goods, are compiled by the U.S. Census Bureau; they are available in Haver’s USECON database. Unfilled orders and inventories are also included. The Action Economics forecast data are in the AS1REPNA database.