MW: U.S. durable-goods orders sink 4% in June, biggest drop in almost two years
Orders for durable or long-lasting goods made in the U.S. sank 4% in June, marking the biggest drop in almost two years and reflecting ongoing struggles by American manufacturers to drum up sales and help boost the U.S. economy.
Economists polled by MarketWatch had expected a seasonally adjusted 1.7% decline.
The only standout performer: Auto makers. Orders for new cars and trucks rose 2.6%, reversing a similar decline in the prior month.
New orders fell most sharply for commercial airplanes and expensive military hardware such as ships, tanks and fighter jets. Passenger plane bookings dove nearly 60% and orders for defense capital good dropped 21%.
Stripping out the volatile transportation sector, orders fell a smaller 0.5%, the Commerce Department said Wednesday.
Still, bookings declined for makers of primary metals, fabricated parts and machinery used in a wide variety of consumer and commercial products.
One small bright spot: Orders for core capital goods, viewed as a proxy for business investment, edged up 0.2% in June after falling in the prior two months. It’s only the second increase of the year, however.
Core orders are also 3.8% lower through the first half of the year compared to the same period in 2015.
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Businesses have scaled back investment over the past year amid falling profits, falling demand for exports and fewer sales to key customers in the U.S. such as energy producers. That’s a drag on the U.S. economy that’s likely to persist, particularly amid a contentious presidential election suffused with anti-business rhetoric by leaders of both parties.
“Businesses have taken a cautious approach toward investment for several years now, so this is nothing new,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. “But I think, if anything, the situation is likely to get worse rather than better in the near term, as many firms that have flexibility in the timing of their investment decisions are likely to sit on their hands until after the election.”
Shipments of core capital goods, a category used to help determine quarterly economic growth, fell 0.4% in June to mark the second decline in a row.
The increase in durable-goods orders in May, meanwhile, was revised to show a 2.8% decline instead of 2.3%.
