U.S. Economic Brief || Durable goods orders and shipments rise in May

Durable goods orders and shipments rise in May

*Durable goods orders and shipments point to still solid economic momentum and capital expenditure plans despite downbeat gauges of business sentiment in recent business surveys and purchasing manager indices. Durable orders increased 0.7% m/m in May following an upwardly revised 0.4% gain in April, while shipments increased 1.4% (Chart 1). Notably, the rise in orders and shipments was relatively broad based and suggests business capital expenditure plans have remained resilient thus far in the face of slowing growth and tightening financial conditions.

*Shipments of core capital goods (nondefense capital goods excluding aircraft), a bellwether of business equipment investment in GDP rose 0.8% m/m, while core capital goods orders, a gauge of underlying manufacturing demand accelerated increasing 0.5% m/m (Chart 2). While this points to near-term resilience in business investment, slowing growth and softening consumer demand for durable and manufactured goods could cloud the business outlook. Increased uncertainty over future economic conditions and rising rates could begin to restrain business investment in subsequent quarters.

*Orders for primary metals (+3.1%), machinery (+1.1%), and transportation equipment all registered robust monthly gains. Auto inventories remain well below their pre-pandemic levels which should support motor vehicle and parts production in the near term. Orders of fabricated metal products and electrical equipment, appliances, and components ticked down, which could reflect moderating consumer spending on durable goods and sharp increases in inventories of household and consumer durables in recent months.

*While manufacturers continue to point to supply chain disruptions and labor shortages as constraints on production, shipments across a swathe of industries posted strong gains in May. Shipments of motor vehicles and parts increased 1.1% m/m, consistent with the uptick in domestic motor vehicle assemblies, while shipments of primary metals (+2.7%) and machinery (+1.6%) also increased substantially (Chart 3).

*Unfilled orders continue to rise, but at a decelerating rate. Unfilled orders increased 5.3% on a 3-month annualized basis in May compared to 8.5% in February. Current order backlogs remain elevated and should support manufacturing growth in the near term.

Chart 1. Durable Goods Shipments and New Orders

Chart 2. Core Capital Goods (nondefense capital goods ex. aircraft) Orders and Shipments

Chart 3. Shipments – Motor Vehicles and Parts

Mickey Levy, [email protected]

Mahmoud Abu Ghzalah, [email protected]

© 2022 Berenberg Capital Markets, LLC, Member FINRA and SPIC

Remarks regarding foreign investors. The preparation of this document is subject to regulation by US law. The distribution of this document in other jurisdictions may be restricted by law, and persons, into whose possession this document comes, should inform themselves about, and observe, any such restrictions. United Kingdom This document is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers. Copyright BCM is a wholly owned subsidiary of Joh. Berenberg, Gossler & Co. KG (“Berenberg Bank”). BCM reserves all the rights in this document. No part of the document or its content may be rewritten, copied, photocopied or duplicated in any form by any means or redistributed without the BCM’s prior written consent. Berenberg Bank may distribute this commentary on a third party basis to its customers.

Member FINRA & SIPC
This email and any files or attachments transmitted with it may contain confidential or privileged information and are intended solely for the use of the intended recipient. If you are not the intended recipient, please do not copy, retain, disclose or use any part of the message or its attachments. Please notify the sender immediately by return email and destroy or delete any copies. Dissemination or use of this information by anyone other than the intended recipient is unauthorized and may be illegal. Communications by email cannot be guaranteed to be secure or error-free. Emails and their attachments are subject to being intercepted, becoming corrupted, getting lost or delayed, or may contain viruses. Therefore, neither the sender nor Berenberg Capital Markets LLC (BCM) accepts any liability for any errors or omissions in the content of this message or problems in its transmission, including those arising as a result of its transmission over the internet.
BCM does not assume liability for the correctness and completeness of all information given and/or attachments contained herein. The provided information has not been checked by a third party, especially an independent auditing firm. BCM explicitly points to the stated date of preparation. The information given can become incorrect due to passage of time and/or as a result of legal, political, economic or other changes. BCM does not assume responsibility to indicate such changes and/or to publish an updated document. Any document(s) or attachment(s) is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers.
In light of upcoming regulatory changes, please be informed that BCM will continue to share information with you until [email protected] receives your termination/deletion request. For more information about the General Data Protection Regulation (GDPR) and our privacy policies please refer to https://www.berenberg-us.com/legal-notice. BCM reserves all the rights in this communication. No part of this communication or its content may be rewritten, copied, photocopied or duplicated in any form by any means or redistributed without BCM’s prior written consent.
The information contained herein and sourced may have been adopted from various news sources, for example, Bloomberg, Reuters, Street Account and various other sources. BCM does not claim accuracy, completeness, timeliness, suitability, or otherwise regarding all the information on the securities, stock markets, or developments referred to within. On no account should the Content be regarded as a substitute for the recipient procuring information for himself/herself or exercising his/her own judgments. BCM is not responsible for any recipient(s) use of this information. This Content is not a solicitation or an offer to buy or sell any of the securities contained herein. This information does not constitute a recommendation or take into account the particular investment objectives, financial situations, or needs of clients. Clients should consider whether any advice or recommendation in this Content is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. The price and value of securities which may be referred to in this Content and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain securities.