Durable Goods Orders Fell Short of Steep Declines in July Amid Transportation Weakness

The U.S. Commerce Department reported on Tuesday that durable goods orders contracted by 2.8 percent in July, marking a significant deceleration from June’s revised 9.4 percent decline. Despite the month-over-month decrease, the contraction proved considerably milder than what market participants had forecasted, as analysts had anticipated a 4.0 percent drop compared to the originally reported 9.3 percent decline in the prior month.

The underlying weakness in durable goods orders was substantially driven by transportation equipment, where new bookings deteriorated by 9.7 percent in July following June’s severe 22.7 percent collapse. Non-defense aircraft and related components led the downward movement, experiencing a 32.7 percent decline in July after an even steeper 52.7 percent plunge the previous month. This volatile sector remained the primary headwind for the headline durable goods reading.

However, a strikingly different picture emerged when examining durable goods orders outside the transportation segment. Stripping out transportation, orders actually advanced by 1.1 percent in July following a 0.3 percent gain in June—a notably robust outcome that surpassed the modest 0.1 percent increase economists had projected. This resilience pointed to underlying demand strength in other manufacturing categories, particularly evident in orders for electrical equipment, appliances, components, machinery, and primary metals.

The performance of non-defense capital goods excluding aircraft—a closely watched proxy for business equipment investment spending—reinforced this constructive backdrop. This category expanded by 1.1 percent in July after declining 0.6 percent in June, while corresponding shipments, which feed into GDP calculations for fixed investment, climbed 0.7 percent versus the prior month’s 0.4 percent gain.

“The July durable goods orders data reflects the volatility stemming from aircraft sector turbulence, while underlying capital goods demand showed more pronounced strength than consensus expectations suggested,” according to Bernard Yaros, Lead U.S. Economist at Oxford Economics. He further noted that business capital spending is positioned to deliver continued growth in the third quarter, though momentum may moderate relative to the second quarter’s performance.

The mixed signals in durable goods orders underscore the uneven nature of manufacturing activity, with core spending intentions pointing to resilience even as headline figures remain weighed down by lumpy transportation bookings.