US orders for durable goods surge due to motor vehicle demand

Washington

AMERICAN orders for durable goods rose more than expected in June, led by a spike in demand for motor vehicles and a pickup in business activity more broadly as states reopened their economies.

Bookings for durable goods - or goods meant to last at least three years - increased 7.3 per cent in June, after a downwardly revised 15.1 per cent surge in May, Commerce Department data showed on Monday. The median estimate in a Bloomberg survey of economists called for a 6.9 per cent gain in June. Core capital goods orders, a category that excludes aircraft and military hardware, climbed 3.3 per cent - also more than forecast.

The second-straight robust increase in bookings suggest manufacturing is stabilising, though a full recovery from the pandemic-induced supply-chain disruptions, lockdowns and diminished demand will take time. Orders are still significantly below pre-pandemic levels, but so far, spending on goods has experienced a largely V-shaped recovery, unlike the services sector.

Motor vehicle and parts orders jumped 85.7 per cent in June after a 28.8 per cent gain a month earlier. Orders also rose for metals, machinery, electrical equipment and communications gear.

Shipments of core capital goods, a figure economists use to calculate gross domestic product, increased 3.4 per cent in June. Even though that marks a second consecutive month of gains, sales are still below their pre-pandemic levels. The first estimate of Q2 gross domestic product, due on Thursday, is forecast to plummet a stunning 35 per cent on an annualised basis - the steepest decline in records dating back to the 1940s.

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Demand for commercial aircraft, however, remains weak, declining sharply in June, said the government's report. US planemaker Boeing only reported one order in June. Excluding transportation, durable goods orders rose 3.3 per cent. BLOOMBERG