Durable goods report strong; orders up, shipping bottlenecks

Durable goods report strong; orders up, shipping bottlenecks

* The production side of the economy remains strong even as manufacturers face supply and distribution constraints. Durable goods orders increased 1.8% in August following an upward revised 0.5% increase in July, while shipments fell 0.5% as bottlenecks in global supply chains and high demand for shipping and freight services have led to logjams at ports and rail yards (Chart 1). Product demand for goods is strong and businesses are striving to replenish inventories ahead of the upcoming holiday season. The global semiconductor shortage continues to weigh on the auto industry, as new orders for motor vehicles and parts fell 3.1% while shipments fell 2.7% (Chart 2).

* New orders for aircraft and parts increased 52% to $19.2 billion while new orders for durable goods excluding transportation moderated increasing 0.2% after a 0.8% increase in July (Chart 3). New orders of capital goods increased 6.7% m/m and 36.3% yr/yr, and are 24% above the level in February 2020.

* Computer and electronic product orders increased 1.4% while orders for machinery slipped 1.2% but remain well above their pre-pandemic levels. Orders for non-defense capital goods excluding aircraft continue to grow increasing a solid 0.46% m/m and 13.7% on 12-month annualized basis reflecting the strong rebound in manufacturing activity (Chart 4).

* Demand for goods is expected to strengthen in the coming months, which should be reflected in strong continued increases in durable goods orders, although growth in shipments may lag until transportation and supply chain bottlenecks ease. The constraints on shipments may dent measured growth in business investment in Q3

Chart 1: Durable Goods Orders

Chart 2: Motor Vehicles and Parts Orders

Chart 3: New Orders of Durable Goods ex. Transportation

Chart 4: New Orders of Nondefense Capital Goods ex. Aircraft

Mickey Levy, [email protected]

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