The numbers: A big drop in new contracts for passenger jets caused orders for U.S. durable goods to fall in July for the third time in four months. But most manufacturers, aside from Boeing, reported good results and business investment strengthened.
Orders for long-lasting goods fell 1.7% in July, the government said Friday.
Economists surveyed by MarketWatch had forecast a 1.1% decline in orders for durable goods — products made to last at least three years.
Stripping out planes and cars, orders actually rose 0.2% to mark the sixth increase in a row. Transportation often exaggerates the ups and downs in orders because of lumpy demand from one month to the next.
What happened: Orders for commercial planes plunged 34% in a widely expected outcome.
Boeing Co. BA, +0.33% typically posts a huge increase in orders early in the summer after the industry’s annual airshow, followed by a lull. The airplane builder took in 233 orders in June and just 30 in July.
Orders for fighter planes and other military aeronautics also sank, while those for autos and parts rose 3.5%, marking the second straight strong gain.
Orders also rose for primary metals, heavy machinery and computers.
Business investment accelerated in July despite festering uncertainty over recently imposed tariffs and the threat of more amid tense negotiations between the U.S. and other key trading partners.
So-called core orders jumped 1.4% last month in the fourth straight gain. They are up a healthy 7.2% in the first seven months of 2018, compared with the same period a year ago.
The originally reported 0.8% increase in orders in June was cut to a 0.7%.
Big picture: The U.S. economy may have slowed a bit from the second quarter’s torrid pace, but growth is still strong. Steady business investment is likely to help prolong the expansion.
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The biggest problem facing manufacturers are higher costs for raw materials and a shortage of skilled workers to fill scores of job openings.
The threat of the White House igniting a full-scale trade war and rising U.S. interest rates are also lurking in the background. So far it hasn’t been a major issue.
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Whaty they are saying?: “The best news in the report came from the core capital goods figures,” said Stephen Stanley, chief economist at Amherst Pierpont Securities.
“Despite the decline in headline orders, the July durable goods data suggest that business equipment investment growth is set to rebound in the third quarter. That provides further reason to think that overall GDP has continued to expand at a healthy 3.0% to 3.5% annualized pace,” said U.S. economist Andrew Hunter of Capital Economics.
Market reaction: The Dow Jones Industrial Average DJIA, +0.27% and the S&P 500 index SPX, +0.28% rose modestly in Friday trades. The stock market has surged lately despite continuing trade tensions and mounting legal setbacks for President Trump.
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The 10-year Treasury yield TMUBMUSD10Y, +0.60% however, has fallen lately and last stood at 2.83%. Bond yields had climbed to as high 3% earlier the summer before retreating.
