US Durable Goods: Not as bad as it seems – Wells Fargo

US Durable Goods Orders dropped 0.6% in May but numberwere above expectations. Analysts at Wells Fargo, point out that core cap-ex orders disappointed, but a massive upward revision to April and growing backlogs point to business spending continuing at a decent pace.

Key Quotes:

“Durable goods orders fell 0.6 percent in May, which was a bit better than expected thanks to a 15.1 percent jump in defense orders. Revisions also showed a smaller decline for April.”

“Excluding defense and aircraft, capital goods orders slipped 0.2 percent, but that follows a substantial upward revision. Core capital goods orders for April were revised up from an already solid 1.0 percent gain to a 2.3 percent increase.”

“Shipments of nondefense capital goods jumped 3.0 percent but are rising at only a 4.8 percent three-month average annualized pace. That suggests equipment spending was likely little changed from the 5.5 percent clip registered in Q1, despite the pickup in core orders since early this year.”