Transportation Surge Drives US Durable Goods +11.2% In July

A spike in demand for transportation equipment sent US durable goods orders blowing past expectations with an 11.2 percent gain in July, the Commerce Department said Wednesday. It was the third consecutive monthly gain in demand for big-ticket manufactured products, with orders up to £230.7 billion in July following June's upwardly revised 7.7 percent climb. That brought the amount closer to the level posted in February 2020 before the coronavirus pandemic hit, but it was all thanks to the strength of transportation equipment, which in July surged 35.6 percent to £74.7 billion.

Motor vehicles and parts formed the majority of that gain, with new orders up 21.9 percent, while defense aircraft and parts, a smaller component of transportation, jumped 77.1 percent. However, in a sign of the continued troubles at Boeing, which has struggled amid slumping travel demand and the global grounding of its best-selling 737 MAX plane, orders for non-defense aircraft and parts fell last month, reflecting customers cancelling orders from the aerospace giant.

Orders for US aircraft fell in July, reflecting Boeing's continued struggles and defying a surge in demand for transportation equipment Photo: ANP / Vincent JANNINK

Excluding transportation, the gains were more tepid, with durable goods orders up only 2.4 percent.

Excluding defense, the gain was 9.9 percent. The data reflects the continued re-opening of factories across the United States following shutdowns caused by the coronavirus pandemic in mid-March. Manufacturers are easing back online with social distancing enforced to prevent infection.

Ian Shepherdson of Pantheon Macroeconomics said the automotive sector has a ways to go to recover its prior health given that orders were cumulatively £81 billion lower over the past five months, even with the boom in July.

"This won't be recovered anytime soon, given the continued depression in fleet auto sales, even though private consumers are buying as many cars and trucks as before the pandemic," he said in an analysis.

And though the "core" capital goods category of nondefense goods excluding aircraft grew 1.9 percent in July, bringing it just a percentage point shy of its level before the pandemic, Shepherdson said, "It's hard to see a full recovery anytime soon, given the devastation in the leisure, travel, hospitality and retail sectors."

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