U.S. Durable Goods Orders Much Stronger Than Expected in July

Daily Forex Fundamentals | Written by TD Bank Financial Group | Aug 27 08 13:40 GMT |

* U.S. durable goods orders rose by a strong 1.3% M/M in July, beating markets consensus for a flat reading.
* Orders excluding transportation were also much higher than expected, rising by 0.7% M/M compared to market expectations for a drop of 0.7% M/M.
* The details of this report were very strong, and suggest that the U.S. manufacturing sector is holding its own.

U.S. durable goods orders rose for the third straight month in July, advancing by a very strong 1.3% M/M, following a similar increase in June (which was upwardly revised from +0.8% M/M). The increase in July was much better than market expectations for a flat reading during the month. However, despite the strength in recent months, orders remain 2.4% below their levels last July. Excluding transportation, orders were up by a more modest 0.7% M/M, which was also much stronger than the 0.7% M/M drop expected by the market, and comes on the heels of the upwardly revised 2.4% M/M surge in June (previously reported as +2.0% M/M). On a year ago basis, orders ex-transportation are up a fairly strong 5.5%.

Core capital goods also surged during the month, rising by 2.6% M/M, with the 3-month annualised trend rising to 13.5% M/M from 9.7% in June.

The details of the report were very strong. With the exception of drops in orders for computers and electronics (down 1.3% M/M) and electrical equipment (down 6.0% M/M), there were fairly broad-based increases in most other components. There were sizeable gains in orders of machinery (+4.6% M/M), primary metals (+2.2% M/M), and transportation goods (+3.1% M/M). And with the 2.5% M/M surge in shipments during the month, the inventory to shipments ratio dropped for the second straight month, falling from 1.56 to 1.54.

On the whole, the report suggests that the U.S. manufacturing sector is holding it own according to this measure, though industrial production and the ISM manufacturing index paint a more uncertain picture. However, with the U.S. economy continuing to show signs of softness, there is little to suggest that this pace of activity will be sustained in the coming months, particularly given the recent rebound in the value of the U.S. dollar, which will likely dampen exports.

TD Bank Financial Group

The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.