Durable goods soar (with the help of aircrafts)

image credit: UK Ministry of Defence

Orders for U.S. durable goods jumped in July by the most on record as bookings surged for commercial aircraft and revisions showed a bigger advance the prior month.

Bookings for goods meant to last at least three years surged 22.6% after climbing a revised 2.7% in June, the Commerce Department said today in Washington. A U.K. air show helped spark a 318% jump in plane orders, the most since January 2011.

Prospects that demand will be sustained are giving companies reason to make larger investments in their operations. Persistent job growth that keeps households spending, along with a pickup in overseas markets, would help provide an added boost for manufacturers.

“When you get past the volatility of the aircraft, what you’re seeing is continued firming in core business spending,” said Tim Quinlan, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “The underlying trend here is ongoing moderate pace” of capital investment, he said.

Another report showed home-price gains are decelerating. The S&P/Case-Shiller index of property values in 20 cities increased 8.1% in June from a year earlier, the smallest 12-month advance since January 2013, the group reported.

The median forecast of 78 economists surveyed by Bloomberg estimated durable goods orders would climb 8%. June orders rose a revised 2.7%. Estimates ranged from a 0.5% gain to a 38.1% surge after a previously reported June increase of 1.7%.
 

Shares Rise
 

Stock-index futures held gains after the figures, with the contract on the Standard & Poor’s 500 Index (CME:SPU14) expiring in September rising 0.1% to 1,997.4 at 9:20 a.m. in New York.

The July gain in durables orders also reflected increased demand for automobiles. Bookings for motor vehicles climbed by the most since August 2009.

A boost in transactions for aircraft helped lift the overall goods figure. Boeing Co., the Chicago-based aerospace company, said it received 324 orders for planes last month, almost three times the 109 tally in June. The company’s reported deals picked up at the Farnborough Air Show in England last month.

Orders excluding transportation equipment decreased 0.8% in July after a 3% increase a month earlier.
 

Investment Proxy
 

Orders for non-military capital goods excluding aircraft, a proxy for future business investment, fell 0.5% last month after a revised June jump of 5.4% that was the strongest since November. The June gain was previously reported as 1.4%.

Non-military capital goods excluding aircraft orders were projected to rise 0.2%.

Shipments of such goods, used in calculating gross domestic product, increased 1.5% in July after rising 0.9% the prior month, today’s report showed. The June reading had previously been reported as a decline.

The data corroborate other surveys indicating factory activity has gained traction in recent months. The Institute for Supply Management’s index climbed in July to its strongest level since April 2011.

Business investment in equipment climbed at a 7% annualized rate in the second quarter, rebounding from a 1% annualized decline in the first three months of the year, according to the Commerce Department’s report on gross domestic product.

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