Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       

Blog Home
   Brian Wesbury
Chief Economist
X •  LinkedIn
   Bob Stein
Deputy Chief Economist
X •  LinkedIn
  New Orders for Durable Goods Declined 2.2% in May
Posted Under: Data Watch • Durable Goods • Europe
Supporting Image for Blog Post


Implications: In case you missed it, the UK voted yesterday to leave the European Union.  As we wrote earlier this month, we view this as a positive development, a move towards freedom. The short-term volatility is a buying opportunity.  With that out of the way, on to the data. Durable goods orders declined 2.2% in May, following a combined 5.3% rise in March and April.  Military aircraft and motor vehicles led orders lower in May, although most major categories showed a pullback as well.  Even excluding the volatile transportation sector, orders fell 0.3% in May, coming in below the consensus expected rise of 0.1%.  Shipments of "core" capital goods - non-defense, excluding aircraft – declined 0.5% in May, but were down a more modest 0.2% including upward revisions to prior months. This is the measure that the government uses for calculating GDP.  If unchanged in June, these shipments will be down at a 0.8% annual rate in Q2 vs the Q1 average.  But that doesn't mean that we expect GDP growth slowed in the second quarter. The first estimate of Q2 growth is still a month off, but we are forecasting that the U.S. economy grew at around a 2.0% rate in the second quarter.  We also get a final reading on Q1 GDP next Thursday, which we expect will show the economy grew at a 1.1% annual rate, up from the 0.8% estimate released in May (the initial Q1 GDP release estimated growth of 0.5%).  Looking forward, we expect durable goods to rebound.  The biggest drag on orders in the past year has been machinery, but that should end soon given the bounce in energy prices.  In other words, business investment should pick up in the months ahead.  In addition, consumer purchasing power is growing with more jobs and higher incomes, while debt ratios remain very low, leaving room for an upswing in big-ticket spending.  While the Fed may cite the May slowdown in orders along with the UK exit vote and market volatility as reasons to hold off on a July (and possibly even September) rate hike, we think this puts too much emphasis on short-term events. The plow horse economy continues to move forward.

Click here for PDF version

Posted on Friday, June 24, 2016 @ 11:36 AM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.