New orders for long-lasting manufactured goods fell sharply in June, dragged down by a steep drop in aircraft demand that reversed a spike the previous month. But orders outside the volatile transportation sector rose for a third straight month, signaling steady underlying demand for business equipment.
The Commerce Department said Friday that new orders for durable goods fell 9.3 percent in June, following an upwardly revised 16.5 percent gain in May. The decline was largely driven by the aerospace sector, where nondefense aircraft orders plunged 51.8 percent after surging in May following President Donald Trump’s trade mission to the Middle East.
Transportation equipment orders dropped 22.4 percent, accounting for the bulk of the decline. Excluding transportation, new orders rose 0.2 percent in June—extending a string of modest monthly gains and coming in slightly better than analysts had expected.
A narrower measure of business investment, nondefense capital goods excluding aircraft, fell 0.7 percent in June after rising 2.0 percent in May. That decline likely reflects a partial payback following the strong performance in the prior two months.
Several key categories within core capital goods saw nominal increases. Orders for motor vehicles and parts rose 0.9 percent, while machinery and fabricated metal products each increased 0.3 percent. After adjusting for inflation using corresponding producer price indexes, most of these categories appear to have posted small real gains in June.
Despite the headline drop, the underlying trend in business investment appears resilient. Over the past three months, core capital goods orders are up at an annualized rate of roughly 10 percent, though growth has moderated from the pace earlier in the spring.
Economists had expected the headline number to fall by around 11 percent due to an anticipated pullback in aircraft orders.
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