BLBG: Orders for U.S. Durable Goods Surged in July on Aircraft Demand
Orders for U.S. durable goods jumped in July by the most on record as bookings surged for commercial aircraft. Demand for business equipment eased after the biggest gain in seven months.
Bookings for goods meant to last at least three years climbed 22.6 percent after a 2.7 percent gain in June that was bigger than previously reported, data from the Commerce Department showed today in Washington. An air show in the U.K. helped drive a 318 percent jump in plane orders, the most January 2011. A 0.5 percent drop in orders for non-military capital goods excluding aircraft last month followed a June increase of 5.4 percent.
Prospects that demand will be sustained are giving companies reason to make larger investments in their operations. Persistent job growth that keeps households spending, along with a pickup in overseas markets, would help provide an added boost for manufacturers.
“Between consumers buying more cars and business investment picking up from the weak first quarter, we’ve had pretty solid growth over the past few months,” Gus Faucher, senior economist at PNC Financial Services Group Inc. in Pittsburgh, said before the report. “Things are looking better for manufacturing after some softness in early 2014.”
The median forecast of 78 economists surveyed by Bloomberg estimated total durable goods orders would climb 8 percent. Estimates ranged from a 0.5 percent gain to a 38.1 percent surge after a previously reported June increase of 1.7 percent.
Motor Vehicles
The July gain in durables orders also reflected increased demand for automobiles. Bookings for motor vehicles climbed by the most since August 2009.
A boost in transactions for aircraft helped lift the overall goods figure. Boeing Co., the Chicago-based aerospace company, said it received 324 orders for planes last month, almost three times the 109 tally in June. The company’s reported deals picked up at the Farnborough Air Show in England last month.
Orders excluding transportation equipment decreased 0.8 percent in July after a 3 percent increase a month earlier.
Non-military capital goods excluding aircraft orders were projected to rise 0.2 percent. Such bookings are considered a proxy for future business investment.
Shipments of such goods, used in calculating gross domestic product, increased 1.5 percent in July after rising 0.9 percent the prior month, today’s report showed. The June reading had previously been reported as a 0.3 percent decline.
ISM Survey
The data corroborate other surveys indicating factory activity has gained traction in recent months. The Institute for Supply Management’s index climbed in July to its strongest level since April 2011.
Business investment in equipment climbed at a 7 percent annualized rate in the second quarter, rebounding from a 1 percent annualized decline in the first three months of the year, according to the Commerce Department’s report on gross domestic product.
Motor vehicle assembly lines are humming as demand lingers near an eight-year high. Cars and light trucks sold at a 16.4 million pace in July, down from the 16.9 million the prior month that was the fastest rate since July 2006.
Some manufacturers are also getting a boost as housing shows uneven progress in rebounding from a slowdown earlier this year. Sales of previously owned homes rose last month at their strongest pace since September, according to data from the National Association of Realtors last week.
Appliance Demand
Whirlpool Corp., a Benton Harbor, Michigan-based appliance maker, is among companies expecting demand to improve the rest of this year after a weak, winter-depressed start to 2014.
“Macroeconomic indicators point to a strong second half as we’re seeing the lowest unemployment rate since September 2008,” Marc Bitzer, president of Whirlpool’s North America unit, said on a July 23 earnings call. “Strong replacement demand will continue as consumers replace older appliances.”
Home Depot Inc., the largest U.S. home-improvement retailer, is benefiting from a jump in demand for appliances.
“The housing market remains a modest tailwind for our business,” Chief Executive Officer Francis Blake said on an Aug. 19 earnings call. “We saw an acceleration of big-ticket transactions” in the second quarter, supporting “a continuing recovery in the U.S. home-improvement market.”
Monthly job gains that are on pace for their best year since 1999 will provide the wherewithal for increased consumer spending. Employers have added an average 230,000 to payrolls a month so far this year. Economists forecast an average 220,000 jobs on average will be added through year-end, according to the median in a Bloomberg survey conducted Aug. 8-13.
To contact the reporter on this story: Michelle Jamrisko in Washington at mjamrisko@bloomberg.net
To contact the editor responsible for this story: Carlos Torres at ctorres2@bloomberg.net Vince Golle
