And the order backlog has started rising again.
By Wolf Richter for WOLF STREET.
New orders for durable goods in July jumped by 9.9% from June, the biggest month-to-month spike since May 2020, and more than reversing the big month-to-month drop in June, which had been driven by cancellations of orders for nondefense aircraft and parts that had hit beleaguered Boeing, which caused orders for Nondefense Aircraft & Parts to be negative for June (-$4.2 billion). But in July, orders for Nondefense Aircraft & Parts came in at $23.4 billion, which makes for a huge month-to-month gain. Aircraft orders are big enough to move the overall needle of durable goods orders.
New orders for durable goods excluding Nondefense Aircraft & Parts – so without Boeing – ticked down 0.6% in July from the record high in June, to $267 billion.
The three-month average (shown in the chart), which irons out the month-to-month squiggles, also edged down from the record high in June, and was up 1.2% from a year ago. Compared to the same period in 2019, orders in July were up 22%.
Note in the chart above:
- The surge in orders coming out of the pandemic that then slowed in mid-2022 at much higher levels.
- The slowdown in the 2nd half of 2023, and then the recovery this year to the record in June.
Excluding Defense and excluding Nondefense Aircraft & Parts, new orders dipped by 0.6% in July from the record in June. In terms of magnitude, defense orders averaged about 5.5% of total durable goods orders over the past 12 months.
So this is a measure of demand for US-made durable goods that excludes defense and it excludes the super-volatile civilian aircraft orders.
Without defense, the slowdown in the second half was milder and only spanned October through December, before the recovery started:
The order backlog surged during the pandemic, amid shortages of all kinds of components, including semiconductors. Most of these shortages have been resolved.
But for aircraft manufacturers – both Boeing in the US and Airbus in Europe – parts shortages persist, and both manufacturers have unfinished planes parked all over the place waiting for parts. The backlog for Nondefense Aircraft & Parts, at $647 billion, accounted for nearly half of total backlog.
The backlog without Nondefense Aircraft & Parts also shot up during the pandemic, but manufacturers began working down their backlog starting in mid-2023, when the backlog, at very high levels, began to dip.
But in June and July, the backlog grew again by a tad amid the growth in orders in the prior months:
Manufacturing orders by largest categories of durable goods:
Orders for Motor Vehicles & Parts, after a slowdown in the 2nd half last year, rose in 2024 and hit new records. In July, the three-month average dipped from the record in June, to $63.6 billion, up by 1.9% year-over-year, and up 19% from the same period in 2019:
Orders for Machinery, after surging to a record out of the pandemic, has riding along a plateau starting in 2023, with slight slowdowns, followed by slight increases. The three-month average has been inching back up all year and in July reached $37.6 billion, a hair below the record, and up 17% from the same period in 2019.
Orders for Fabricated Metal Products have stalled at high levels. The three-month average in July remained at $36.2 billion for the fourth month in a row, down a hair from the record in November, and up 13% from the same period in 2019.
Orders for Computers & Electronic Products have continued to zigzag higher. In June, the three-month average hit a 14-year high of $25 billion and stayed there in July, up by 2.5% year-over-year and by 11% from the same period in 2019.
Note that over the past two decades, prices of computing power, memory, storage, etc. have collapsed as the technology has advanced. These orders are not adjusted for these price declines:
Orders for “other” durable goods, a broad catch-all category, has been plateauing at around $48 billion since late 2022, after the dramatic jump to new records coming out of the pandemic, up by 22% from the same period in 2019:
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TLDR: More inflation incoming.
Yup these data, yeah we totally need that rate cuts in Sept, better make it 50 or 75 basis points and 4 more by next year please…. /S
Nah .. we must go to ZIRP or lower immediately! …/S
Phoenix-Ikki +1000!
Not if organizations making the products are more efficient. Imagine if a lot of these companies are using less labor, and have gotten used to robotics doing the bulk of the work.
If they have, maybe they have been able to reduce their prices or hold them steady (- inflation by not contribhting to CPI up), and reduce expenes (- inflation by paying for less or same labor, less to other expense categories, which would be a gain to other companies).
The number 1 enemy of inflation more productivity. 2nd is less pool of currency
Agreed, its a little too early to say how prices will be affected, but it does indicate the economy is moving along just fine without rate cuts.
Wolf is sounding so bullish lately. I’m thinking of saving my usual quarterly donation for a down payment donation towards Jim Cramer’s Investment club.
Just giving you the numbers so you can look at the pictures and enjoy.
Wolf,
Thanks very much for your data. We are using it in our appraisal reports.
Wolf,
Is all this stuff being manufactured in the US? Or is some of it imports?
All orders to manufacturing locations in the US.
Imports are an entirely different matter, they’re a negative for GDP (subtracted from GDP), and are tracked separately.
The Texas manufacturing report also showed the smallest decrease in a long time today. It seems like “the second interest rates are going down we are going to ramp up” claims from early this year were accurate.
I don’t read too much into this as if a slowdown occurs in the employment markets feels like that will show up in other places first. Electronics and computers might be just ramping up for the very soon to be holiday consumer shopping season. Definitely crazy deals on solid tech like OLED monitors and such as competitors heat up and prices come way down.
MW: Kroger and Albertsons defend merger plan in court against FTC’s objections
If durable goods consumption is above its trend, then gdp is likely to be above its trend in the next quarter.
Durable goods make up about the same percentage of the US economy as non durable goods, like food and clothing
Thought I’d drag this in here from the internet…
A durable good is something that last 3 yrs or more and doesn’t have to be replaced often, such as washers, refrig, planes..
Yes, your Jewells are a durable goods,..
Get ready for another round of inflation that “came out of nowhere” with that manufacturing index inherent labor demand and the rate cuts stimulus. There is hope, Zimbabwe, a country that wants to join BRICS, has just released a gold backed currency that is spreading like wildfire throughout the country replacing the dollar in transactions. Further good news is: “English is Zimbabwe’s lingua franca, used in government and businesses,” so I am looking forward to the Bank of Zimbabwe opening a branch right next to my local Bank of America.
Nothing says “safe and secure” like the Zimbabwe trademark on a financial product.
LOL!
Are these numbers in the graphs inflation adjusted? Or nominal figures?
Thanks in advance
RTGDFA.
There’s a whole paragraph about it, LOL
I re-read the article trying to find this, was it this part
“Note that over the past two decades… These orders are not adjusted for these price declines”
If these orders are not adjusted for inflation does that mean on an adjusted basis that domestic durable goods orders are roughly flat with 2019? Should we expect these orders to increase with the boom in factory construction?
1. OPPOSITE. Read the whole paragraph. Prices of lots of durable goods have dropped, particularly electronics. This is what the paragraph says:
“Note that over the past two decades, prices of computing power, memory, storage, etc. have collapsed as the technology has advanced. These orders are not adjusted for these price declines:”
2. You have to adjust manufacturing orders of computer equipment by the price DECLINES in computer equipment at the wholesale level, etc. and then the adjusted growth in orders is much bigger.
3. You CANNOT adjust manufacturing inflation by consumer price inflation. Only card-carrying idiots would try to do that. Consumer price inflation (rent, insurance, milk, restaurants meals, pet services, etc.) does NOT APPLY to manufacturers. You have to adjust manufacturing orders of computers to the price DECLINES of computers at the wholesale level, and then you will see the line soar because for the last two decades-plus there has been DEFLATION in computers and many other durable goods.
Thanks Wolf. As a manufacturer of durable metal roofing, we fit into your fabricated metals category. We have seen a little pick up the last 45 or so days after a downward trend for several months. Hard to say at this point if this is a trend that will continue or just a seasonal blip. It is petty common for us to see an uptick late summer into early fall.
Todd,
Thanks for the update on your corner of fabricated metal products manufacturing.
Just like the government employment stats, seems to sharply contradict the quarterly reports of durable goods manufacturers and small business surveys. If there is no conflict, then I suppose it is only the higher prices that are keeping the total sales figures elevated as the volume in units drop. This chart seems to scream stagflation and margin squeeze.
Its obvious from the charts whats going to happen. Its a shame that the base rate, by design, lurches below and above what the actual rate shoud be.
What many people might consider, is that actual rates as passed through to the population at large are much higher than the base rate. If you are sufficiently wealthy in the UK then you can have a bank account at Coutts and borrow at the base rate which is invariably lower than inflation.
Inflation is a tax on the poor and the tragedy is we all watch even if we don’t benefit.
Inflation is a tax on everyone and only benefits politicians and bureaucrats.
Great news. There is no reason the Government can’t run even higher deficits. The military wants another 100 billion per year. Give it to them.
There is plenty of room on the Credit Card for any number of conflicts.
There is no problem we face that more credit cannot fix and obviously we have a unlimited room for more credit creation. The happy numbers plainly tell us that. Politicians are the happiest of all.
Case says home prices reached a new high in June……Durable orders jump……unemployment claims as low as can be……..trade deficit exploding……both parties stating their aim to further raise tariffs against China……..Tariffs raised 6 months ago with an 18 month lag……..unemployment at full employment……..inflation still in the system…….so what’s the fed do
Cut………either political or crooked…..take your choice…..no other way to think about it. ……they are going to be cautious……heck…..they should not even be thinking about it…….they should be thinking about getting the QT rolling higher.
My poor country is in the hands of morons.
They are so scared of having some marginal person lose their job that the dollar is going to collapse if/when they pull the trigger. Marginal persons that are crossing the border by the truckload. What does a lower dollar do……18 months out……inflation…….duh!
Higher for longer!
Prices, rates, population (in numbers and intoxicants), politicians.
The (guaranteed?) Sept. cut is the mate to the 2018 “hiking cycle.” The policy gaffe that will solidify this Fed chairman’s legacy.
The following inflation and next hiking cycle are both just on the horizon. With a new (or rerun) head politician in house: government spending, tax code alterations and inflation creating “price controls” or tariffs are bound to upset the apple cart.
In the name of margin protection, businesses will join in chorus (again) and geopolitical messiness almost guarantees the backlog remains, energy prices will keep bouncing and even food prices will be subject to shocks, again… still.
The “Victory” banner shoulda’ been out at Jackhole, but what does a Struggler know?