US durable goods orders dipped in May for the third time in four months, pulled down by a canceled order for the controversial Boeing 737 which was involved in multiple fatal crashes.
Key Takeaways
- Business investment rose in May, indicating that there is hope amid the ongoing trade conflict with China.
- The Boeing company’s difficulties continue to weigh on the manufacturing industry figures.
- Orders for durable goods dipped by -1.3% in May vs. -1% expected.
Durable goods orders missed the mark in May, falling -1.3% vs. -1% expected and up from the -2.1% decline seen the month prior. Orders in April were also revised lower than the original figure.
Eliminating the volatile components of cars and planes, orders actually rose by 0.3% in April, breaking the three months of consecutive decline. Orders for commercial aircraft in May dipped by 28% due largely to a major order of 737s destined for India after an aircraft carrier shut down. Boeing has received few orders for the aircraft due to the fatal crashes earlier this year, resulting in a suspension of the plane.
Orders for autos rose 0.6%, and orders for heavy machinery, primary metals, computers and networking gear also increased. Core orders, which measures business investment, rose 0.4% in May, the largest increase since January. Business spending and investment has declined in 2019 due to the trade war between China and the US, which relies heavily on Chinese raw materials.
China also imports soy in bulk from US farmers. Investment rose annually in the 12 months through May from 1.2% to 1.4%. Tariffs have had a major impact on both the US and Chinese economy with business in both nations taking a risk aversion stance for the time being.
US durable goods #orders -1.3% (May) but weakness concentrated in #aircraft (nondefense -28%) due to #Boeing737Max:
- core orders +0.4%
- #shipments +0.4%
- core shipments solid +0.7%> Core orders +1.3% y/y & shipments +4.0% y/y. Cooler given headwinds but still some momentum pic.twitter.com/G5KKt1NlR6
— Gregory Daco (@GregDaco) June 26, 2019
Market Reaction
Spot gold is down -0.57% and trading at $1,406.83/oz with a high of $1,425.45/oz and a low of $1,402.77/oz. The price of the precious metal has corrected slightly after recent strong gains, partially due to tensions between the US and Iran in the Persian Gulf which remain ongoing.
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