Durable Goods Orders Flat in May

Daily Forex Fundamentals | Written by Wachovia Corporation | Jun 25 08 17:49 GMT |

Orders for durable goods were flat in May as businesses begin to anticipate softening demand. Stripping out the volatile transportation component, orders were down 0.9 percent, while last month’s numbers were revised lower. Non-defense orders ex-aircraft were down 0.8 percent, a sign that business spending could be weak Q2.

Orders Flat, Automotive Sector Continues to Struggle

• A flat number after two consecutive monthly declines is hardly a sign of vibrant growth. Businesses are scaling back.
• New automotive orders continue to trend lower. While production cuts at auto-makers earlier this year and the incentive package rolled out this week may help reduce high inventories. We’re not looking for a turnaround anytime soon.

Ex Aircraft Orders Weak, Inventories Still Climbing

• Non-defense capital goods orders ex-aircraft were down 0.8 percent in May, on the heels of a strong 3.1 percent gain the previous month. Business spending will likely be weaker in Q2.
• The climb in inventories, up 5.1 percent since last year, is concerning. This is especially true in transportation equipment where inventories increased 0.9 percent last month alone.

Wachovia Corporation
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