Implications:  New orders for durable goods took a breather in August, remaining little changed versus July.  The good news is that orders fared slightly better than consensus expectations, with growth elsewhere offsetting a 0.6% decline in the transportation sector.  Transportation is a notoriously volatile category month to month, so we prefer to focus on orders outside the sector for a better check on the broader economy. Orders excluding transportation continue to rise, up 0.3% in August and 11.2% in the past year. The increase in these new orders was led by industrial machinery (+1.1%), primary metals (+1.2%), and electrical equipment (+1.1%). Notably, orders for computers and electronic products were unchanged in August after dropping 0.7% in July, a slowdown for a category that has benefited significantly from the recent surge in capital investment for data centers.  Despite the drop, orders in this category are up 16.5% in the past year – trailing only June for its largest annual gain in about 20 years. The most important number in today’s release is core shipments – a key input for business investment in the calculation of GDP – which climbed 0.6% in August following a 1.4% increase in July. If unchanged in September, core shipments would rise at a 14.5% annualized rate in Q3 versus the Q2 average, an acceleration from the 11.6% pace in Q2.  These shipments are up 11.4% over the past year, the largest annual gain outside the COVID years since 2012, as capital spending from the hyperscalers, the reshoring of production, and a more favorable tax environment for investment have helped drive a strong increase.  Meanwhile, increased defense procurement has provided another boost, with defense shipments rising 28.0% over the past year and nearly doubling since 2019.  As you can see in the nearby charts, the strength we see in the durable goods data today is a far cry from three years ago.

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