The Economy

U.S. Durable Goods Orders Jump 7.3% in June

“The sugar rush from re-openings has now faded and a resurgence of domestic coronavirus cases ... will weigh heavily on business investment."
Matthew HellerJuly 28, 2020
U.S. Durable Goods Orders Jump 7.3% in June

New orders for U.S. durable goods rose for a second straight month in June but hopes of a sustained recovery in manufacturing appear slim due to the resurgence of the coronavirus pandemic.

The Commerce Department reported that orders for goods that are meant to last three years or more climbed 7.3% last month, followng a 15.1% rise in May and topping economists’ forecast of a 6.5% increase.

Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, jumped 3.3% in June — the biggest increase since July 2018.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

The improvement in manufacturing reflected pent-up demand following the re-opening of businesses, with the auto sector benefiting in particular as orders for motor vehicles and parts accelerated 85.7% after increasing 28.8% in May.

But as Reuters reports, “The budding recovery is threatened by a resurgence in new cases of the coronavirus, which has forced some authorities in the hard-hit South and West regions to either close businesses again or halt reopenings.”

“The sugar rush from re-openings has now faded and a resurgence of domestic coronavirus cases, alongside very weak demand, supply chain disruptions, historically low oil prices, and high levels of uncertainty, will weigh heavily on business investment,” said Oren Klachkin, lead U.S. economist at Oxford Economics in New York.

Economists estimate business spending on equipment contracted at as much as a record 36% annualized rate in the second quarter. It would be the fifth straight quarterly decline in overall business investment.

Subtracting autos, U.S. durable goods shipments were up less than 4% and new orders fell more than 6%. As a whole, orders and shipments are still down about 16% and 8%, respectively, from pre-pandemic levels.

Auto manufacturers, moreover, still shipped 12% less in June than in February, and their new orders were 11% lower.

“The speed of the overall recovery is ultimately much more dependent on consumer spending,” Barron’s said, noting that economists expect an increase in spending of 5.4% when the Labor Department issues its June report on Friday.

Carl Court/Getty Images