– July 26, 2018

New orders for durable goods jumped 1.0 percent in June following monthly declines of 0.3 percent and 1.0 percent in the prior two months. The gain in June was supported by large increases in both defense and nondefense aircraft orders. Nondefense aircraft orders gained 4.3 percent in the month while defense aircraft orders jumped 20.2 percent. Because of the large per-unit price and the tendency for buyers to place orders for multiple aircraft at once, both of these series tend to be extremely volatile. If aircraft are excluded, new orders for durable goods rose 0.3 percent for the month of June following a drop of 0.1 percent in May and a gain of 1.7 percent in April. Over the past two years, new orders for durables excluding aircraft have established a solid uptrend, rising 15.3 percent (see chart).

Nearly every category of durable goods shown in the report posted a gain in the latest month. Among the industries showing increases, orders for fabricated metal products rose 0.1 percent, machinery orders were up 0.2 percent, orders for computers and related equipment gained 0.6 percent, electrical equipment and appliances rose 1.5 percent, motor vehicles gained 4.4 percent, and the catchall “other durables” category added 0.7 percent. The lone decliner was primary metals, down 0.4 percent.

Within the report for new orders for durable goods are data on new orders for capital equipment, or business investment. This subcategory is particularly important for two reasons. First, business investment can have a major impact on future productivity trends, and productivity is critical for helping offset cost increases as well as raising living standards over the long term. Capital-goods orders are also important as they tend to be early indicators of turns in the business cycle. Real new orders for core capital goods — that is, real nondefense capital goods excluding aircraft — is one of the indicators in AIER’s Leading Indicators index.

On a nominal basis, new orders for core capital goods rose 0.6 percent in June following gains of 0.7 percent in May and 2.0 percent in April. Similar to the broader durables-goods category, the trend of new orders for core capital goods has been solidly upward since mid-2016. New orders for core capital goods are about 17 percent above the low in 2016 (see chart again).

Data on initial claims for unemployment insurance were also released today. Claims rose 9,000 to 217,000 while the four-week average, which helps reduce weekly volatility, came in at 218,000, down from 220,750. Though claims rose in the latest week, the overall level is extremely low by historical measures and, when measured as a share of payroll employment, is close to a record low. The latest data suggest the very tight labor market continues.

Both of the reports today provide further evidence of a robust economy with little risk of recession in the coming months.

Robert Hughes


Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.

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