The latest report released by the United States Department of Commerce Census Bureau showed demand for durable goods dropped in July by 0.4 percent, excluding orders in the transportation sector. According to analysts, the data indicated that companies are cutting their investments.
The Commerce Department adjusted the total figures for the manufacturing industry in June. New orders were changed from $465.8 billion to $465.1 billion; total shipments from $469.9 billion to $468.9 billion; unfilled orders from $988.1 billion to $988.5 billion. The total inventories were also revised from $605.4 billion to $604.4 billion
Data showed the total orders in July increased by 4.2 percent with the inclusion of the transportation sector, where demand increased by 54 percent. In July, The Boeing Company (NYSE:BA) received 260 total orders for aircrafts.
Analysts do not consider aircraft orders are good indicators of demand for manufacturing goods. According to them, orders in the sector vary every month and there is a possibility that shipments may take several years.
The Commerce Department said shipments of durable goods climbed by 2.6 percent or $5.9 billion to $231.1 billion and unfilled orders up by 0.8 percent or $7.8 billion to $996.3 billion in July.
Orders for fabricated metal products fell by 0.4 percent, machinery down by 3.6 percent, communications equipment dropped by 4.0 percent, electrical equipment, appliances, and components declined by 2.1 percent, defense aircraft and parts also dropped by 8.5 percent. Orders for all other durable goods decline by 0.1 percent.
Caterpillar (NYSE:CAT), the largest construction equipment manufacturer posted solid profit during the second quarter of 2012.
Demand for primary metals increased by 2.7 percent, computers and related products up by 3.7 percent, transportation equipment and motor vehicles and parts surge by 14.1 percent and 12.8 percent respectively. Data also showed the orders for capital goods and non-defense capital goods increased by 3.9 and 6.8 percent respectively.
The data released by the Commerce Department is mixed. According to John Ryding of RDQ Economics, “The headline surge in orders in July was fueled by aircraft and autos (the latter no doubt boosted by a changed pattern of summer shutdowns) and masks underlying weakening in manufacturing orders. Durable goods orders are volatile and, as highlighted by the June data, subject to massive revisions. However, both the underlying durable goods orders data and the manufacturing ISM orders series point to contracting order levels. This red flag suggests that manufacturing, which had been the mainstay of the recovery, could slow sharply over the coming months (manufacturing output had risen 3.9% over the first seven months of the year) and hinder the economy’s ability to pick up from its paltry sub-2% growth rate recorded over the first two quarters of the year.”
During the past several weeks, analysts observed slight improvement in the economy. They projected an average growth below 2 percent from July to September. Analysts believe there is a possibility the Federal Reserve will do something to help boost the economy, based on the report of the Department of Commerce on durable goods.