Saturday, 25 August 2007

Durable Goods orders strong in July

Durable goods orders jumped 5.9% in July on higher demand for airplanes, vehicles, computers, machinery, steel and most other kinds of long-lasting manufactured goods. Orders for durable goods increased 1.9% in June, revised up from 1.3% previously.

Excluding the 10.8% increase in transportation goods, orders rose 3.7%, the fastest gain in two years. Orders for core capital equipment goods rose 2.2% after declines the previous two months.

Durable-goods orders are highly volatile from month to month, especially in the aircraft sector. So far in the 7 months of 2007, orders are up 1.2% compared with the same period a year ago.

Second-quarter growth is likely to be revised higher to about 4% annualized next week from the 3.4% initially reported. The latest report on durable goods gives 3Q07 a stronger start than most economists were expecting.

No doubt the numbers show a strong performance from the factory sector in July and add some support to the case for the Fed to hold tight on rates in Spetembet. However there is a lot of data to come out before the next FOMC meeting.

The question remains what impact, if any, the credit crunch that got underway in August will have on companies' ability and willingness to invest in capital equipment.