Underlying trend in U.S. core orders and shipments point to stronger activity ahead

U.S. durable goods orders were weak in May, with the 1.8% drop worse than what consensus was calling for. There was a large drop in Boeing's orders for the month, which had a decidedly negative impact on the headline figure. Excluding transportation, durable goods orders were smack in-line with expectations, up 0.5% in May after dropping 0.3% in the prior month. 

By category, it was a mixed bag. Weaker results for computers, transportation, electrical/appliances, mixed in with stronger results for electronics, machinery, metals, communications.

Core shipments stumbled 0.6% in May, but this follows two straight monthly increases. For Q2, this suggests that equipment spending rose about 2% annualized, building on Q1's gain. Core orders rose 0.4% in May, although this follows an up/down pattern over the past four months. Core orders are still down in Q2, but the trend is becoming less negative, which suggests potential for a pickup in spending.

BMO Capital Market notes: "Not a report to be particularly proud of, but the underlying trend in U.S. core orders and shipments point to stronger activity ahead. It helps that the greenback, though strengthening again recently, is off its highs, and oil prices are steadying."