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  New Orders for Durable Goods Rose 2.3% in May
Posted Under: Data Watch • Durable Goods • Employment • GDP
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Implications:  Orders for durable goods rebounded in May, following an April lull as companies battled supply chain shortages – most notably in semiconductors – that have been constraining activity in some sectors.  As we have seen across a number of economic reports – housing starts, retail sales, and new home sales – there is a battle taking place between consumers who are back in force as restrictions have eased, and companies that are struggling to keep up with demand while inputs (including labor) remain hard to come by.  While transportation equipment (particularly autos) have seen their fair share of turbulence over the past year, they were the key driver of higher orders activity in May, as commercial aircraft orders boomed and orders for autos rose 2.1%.  But it wasn't just transportation equipment that rose in May.  Orders excluding transportation were up 0.3%, and today's report showed notable upward revisions to prior months, as well.  Looking at the details shows activity across sectors was mixed, with orders for primary metals (+2.2%), and electrical equipment & appliances (+1.3%) rising, while industrial machinery (-0.4%), and computers & electronic products (-0.3) declined.  On a year-ago basis, durable goods orders are up a staggering 41.6% from May 2020.  One of the most important pieces of data from today's report, shipments of "core" non-defense capital goods ex-aircraft (a key input for business investment in the calculation of GDP growth), rose 0.9% in May, and if unchanged in June these shipments will be up at a 9.7% annualized rate in the second quarter.  Some will focus on the fact that quarterly growth rates in this measure of business investment have slowed: 39.9% annualized growth rate in Q3 2020, 17.8% annualized growth in Q4, and 11.3% annualized growth in the first quarter of 2021.  But those growth rates are skewed by unprecedented shutdowns and snarled supply chains.  Business investment is still a tailwind that will help lift real GDP substantially in 2021.  In employment news this morning, initial jobless claims fell 7,000 last week to 411,000.  Meanwhile continuing claims declined 144,000 to 3.390 million.  There is a growing list of states that have announced an early cut-off of expanded unemployment benefits that have served as a headwind to hiring across the U.S. despite job openings standing at the highest level in history.  We anticipate a robust pace of employment growth as we move deeper into 2021. 

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