US durable-goods orders unexpectedly quicken on auto boost

U.S. orders for durable goods rose in July by more than double estimates amid a continued surge in automobile demand, indicating factories will help support the economic rebound in coming months.

Bookings for durable goods—or items meant to last at least three years—increased 11.2% from the prior month after a 7.7% jump in June, Commerce Department data showed Wednesday. The median estimate in a Bloomberg survey of economists called for a 4.8% gain in July.

Core capital goods orders, a category that excludes aircraft and military hardware and is seen as a barometer of business investment, rose 1.9%, slightly more than forecast.

The third straight increase in orders for durable goods suggests the manufacturing sector is largely continuing its V-shaped recovery at a robust pace, though orders remain below pre-pandemic levels. The latest increase was driven by a continuing return of auto production that was shut down earlier this year, along with a surge in military spending.

An underlying gauge of business investment decelerated, underscoring the fact that companies remain hesitant to invest amid high unemployment and hundreds of thousands of new Covid-19 cases in the U.S. each week.

“The underlying picture is still pretty depressed,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

U.S. stocks were mixed at the open, with shares of industrial companies in the S&P 500 declining.

Transport Boost

Orders for motor vehicles and parts jumped 21.9% in July, following an 85.6% surge the prior month. Excluding transportation, durable goods orders rose 2.4%, above estimates for 2%.

Shipments of core capital goods rose 2.4% in July from the prior month, exceeding forecasts. The Commerce Department will release the second estimate of U.S. gross domestic product in the April-June period Thursday. The third-quarter figure, which will incorporate the July data, will not be available until the end of October.

Ryan Sweet, head of monetary policy research at Moody’s Analytics, took a more upbeat view on the data, saying that “we still have a long ways to go from fully recovering from this recession, but I think business investment is starting to show signs of perking up.”

With air travel still extremely depressed, orders for civilian aircraft and parts were negative for a second month, at minus $5.8 billion following minus $10.5 billion in June. U.S. planemaker Boeing Co. reported no orders in July and only one order in June.