Boeing & jet engine makers are part of it. And the other part is the rest of manufacturing.

By Wolf Richter for WOLF STREET.

Something interesting has been happening with orders that manufacturers in the US have received this year.

When Boeing gets an order for 30 planes in one month, it’s such a huge dollar amount that it moves the national durable goods orders for that month. Then the next month or two, Boeing doesn’t receive any big orders, just smaller orders and so overall orders drop for those months.

Orders for “Nondefense aircraft and parts” had spiked in May, but then plunged in June and July. These are orders received by Boeing’s civilian aircraft business, other aircraft manufacturers, jet engine makers, etc. This caused the overall durable goods orders to spike in May and then sink back to earth in June and July, but not all the way (blue in the chart).

Overall durable goods orders are a measure for demand for USA-made planes, trains, automobiles, trucks, motorcycles, snowmobiles, ATVs, ships, boats, fabricated metal products, machinery, computer and electronic products, electrical equipment, appliances, components, semiconductors, etc.

The three-month average (red in the chart), which irons out some of these month-to-month ups and downs, rose to a new record in July of $319.5 billion, up by 11.3% year-over-year, according to data from the Census Bureau today.

There had been a cooling-off period from mid-2023 off the pandemic’s massive surge, through early 2024. Then orders recovered a little for the rest of 2024.

But so far this year, orders have shot higher. Over the past six months, the three-month average jumped by 10.2% (+21.4% annualized). This is a big six-month move.

Defense accounted for only 6% of total durable goods orders over the past 12 months. It runs at about $13-22 billion a month and is not a huge factor in US manufacturing.

And more aircraft orders are coming: Korean Air announced yesterday that it had ordered 103 Boeing aircraft for $36.5 billion, plus GE Aerospace engines and services for another $13.7 billion, for a total of $50 billion.

Korean Air’s orders were not included in the July durable goods orders for “Nondefense aircraft and parts,” released today. Part of those orders may be included in the August or September data. So the up-and-down dance continues with another spike on the way.

In May, orders for nondefense aircraft and parts had spiked to $60 billion. In June, they dropped to $28 billion; and in July, to $19 billion. But now there’s Korean Air’s order making its way toward the data.

Durable goods orders without “Nondefense aircraft and parts” rose to $284 billion, roughly matching the record in May (blue in the chart below).

The three-month average (red) rose to $284 billion as well, a new record. Over the past six months, it rose by 2.8% (+5.7% annualized).

This is the rest of US manufacturing without nondefense aircraft and parts. Note the lull in 2023 through early 2024, the increase that followed, and the accelerated pace of increases over the past few months:

Shifting more manufacturing to the US is crucial. Trump and Biden both understood this. Trump 1 went for it with tariffs to incentivize companies to build factories in the US. Biden went for it with massive grants paid to companies under the CHIPS Act and other programs and acts to incentivize them to build factories in the US. Trump 2 went for it by imposing wide-ranging tariffs on imported goods to incentivize companies to produce in the US. In addition, he maintained the CHIPS Act, but rebranded it and got Intel to issue shares to the government in exchange for the $11 billion in cash it is receiving under the CHIPS Act.

It takes years to build a modern factory, to go from planning to mass-production. A factory construction boom started in mid-2021 and continues. The spending on the construction of factory buildings has been running at over triple the rate before the pandemic.

And this is just spending on the buildings and doesn’t include the costs of production equipment and industrial robots that can dwarf the costs of the building.

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WOLF STREET FEATURE: Daily Market Insights by Chris Vermeulen, Chief Investment Officer, TheTechnicalTraders.com.