Durable Goods Orders: +1.0% month-over-month (Cons: +3.0%); +3.2% year-over-year
Durable Goods Shipments: +1.7% month-over-month; +7.7% year-over-year
NDCGXA Orders: +0.6% month-over-month (Cons: +0.5%); +8.3% year-over-year
NDCGXA Shipments: +1.0% month-over-month (Cons: +0.4%); +7.5% year-over-year
Durable goods orders rose less than expected in June while orders for non-defense capital goods ex-aircraft (NDCGXA) were higher than economists’ expectations. NDCGXA orders rose +0.6% in June, while May’s rise was revised up to +0.7% from +0.3% originally.
NDCGXA orders, which are a good proxy for business CapEx, rebounded in Q2 after decelerating in Q1. On an annualized basis, NDCGXA orders rose +10.9% quarter-over-quarter in Q2, up from +1.5% growth in Q1. While momentum has picked up in recent months, year-over-year growth in NDCGXA orders was +8.3% as of June, only slightly higher than the average growth of +7.8% over the past 12 months and down from the recent high of +13.3% in September 2017.
Taking a step back, the current pace of growth in NDCGXA orders is consistent with moderate pace of economic growth. In 2010 and 2011, during the early phase of the economic cycle, NDCGXA order grew by an average of +12.3% year-over-year, well above the levels of growth seen over the past two years. While corporate tax reform has given businesses a marginal reason to increase investment spending, we view business CapEx as unlikely to materially accelerate given the limited amount of economic fuel remaining in the current cycle.
NDCGXA orders were up +8.3% year-over-year as of June, up from +6.9% growth in May.
The strength in NDCGXA orders in June was driven by increases in electrical equipment, appliances, and components (+1.5% month-over-month) and computer and electronic products orders (+0.6% month-over-month). Machinery orders, which make up approximately half of NDCGXA orders, rose +0.2% month-over-month.
NDCGXA shipments, which typically move in tandem with NDCGXA orders and flow into GDP readings, were also stronger than expected, rising 1.0% month-over-month in June. NDCGXA shipments were up +7.5% year-over-year, up from +6.4% growth in May. NDCGXA shipments were up +4.6% quarter-over-quarter in Q2 on an annualized basis.