Implications: Durable goods orders continued to recover in June, rising 7.3% on the heels of May's 15.1% jump. That said, there is still a ways to go to make up the massive declines in March and April, with overall orders remaining 16.0% below February. The volatile transportation sector was the biggest source of strength in June, jumping 20.0%, as a surge in orders for motor vehicles and parts more than offset declining aircraft orders. Excluding transportation, activity came in slightly below expectations, rising 3.3% in June. It's worth noting that orders for every core non-transportation category rose in orders for the month. Fabricated metal products registered the largest improvement, up 4.5%, followed by primary metals (+3.6%), machinery (+2.7%), electrical equipment (+1.2%), and computers & electronic products (+0.1%). While computers and electronic products showed the smallest improvement in June, the category has been remarkably stable throughout the Coronavirus Contraction, with orders modestly up since February (pre-pandemic), probably reflecting extra equipment needed to help people work from home. 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 3.4% in June, but declined at a 19.8% annualized rate in Q2 vs. the Q1 average. We're forecasting that real GDP declined at a 35% rate in the second quarter, and we get our first look at the government's estimate when the advanced report on Q2 GDP is released this Thursday. For a deeper dive into what drove the historic decline in the second quarter, check out this week's Monday Morning Outlook. But remember, while the second quarter was bad – terrible in fact – activity turned a corner in May, and continued to recover in June. The third quarter, which we are roughly 1/3rd of the way through, is on track to see double-digit positive real GDP growth. We expect the economy will continue to grow at an above-trend pace in Q4 and through 2021, but the road to recovery will take time. What matters most, is that we have started our way down the path.
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