U.S. durable goods orders fall more than expectations in May on decline in capital goods orders

U.S. durable goods orders dropped on a sequential basis in May, falling more than consensus expectations. Durable goods orders fell 1.1 percent, as compared with consensus expectations of a decline of 0.6 percent. The data for April was downwardly revised by one-tenth to -0.9 percent on a sequential basis.

The drop in May was driven by a sharp decline in capital goods orders that dropped 3.1 percent sequentially, considerably more than consensus expectations. In this category, core capital goods orders dropped 0.2 percent. Core capital shipments also dropped 0.2 percent sequentially. Both these components are important inputs to the BEA’s estimate of equipment investment in GDP, and the core data is viewed as consistent with weak business investment in the second quarter, noted Barclays in a research report.

Meanwhile, the transportation orders dropped 3.4 percent, driven by a sharp decline in non-defense aircraft orders that dropped 11.7 percent. Durable goods orders, stripping transportation, increased modestly 0.1 percent in May.

“We lowered our Q2 GDP tracking estimate by one-tenth to 1.9 percent q/q saar at the back of lower equipment investment”, added Barclays.

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