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Taking into account the jump in the volatile aircraft component and downward revisions to prior months’ data, the 2.1% increase reported today in orders is unimpressive, according to analysts at Wells Fargo.  

Key Quotes:  

“Today’s figures for durable goods orders, which cover the month of July, are dated more than usual. The threat of tariffs on remaining imports from China, most of which are for consumer goods, did not come until August 1. Heading into the recent escalation, durable goods orders were improving. Orders for July were up 2.1%, which was the largest monthly gain in almost a year. The solid headline, however, misleads the overall state of capital spending.”

“Nondefense capital goods orders excluding aircraft, a bellwether for equipment investment, managed a 0.4% gain. While technically that was stronger than consensus expectations for July, it came amid a meaningful downward revision to June, and leaves the level of core orders down slightly from where it reportedly stood a month ago.”

“Capital spending plans at manufacturers continue to edge lower as global growth slows further and trade uncertainty lingers. While spending plans according to all the regional PMIs are not nearly as low as the levels registered during the mid-cycle slowdown of 2015-2016, the pullback suggests investment is likely to remain constrained in the coming months. The upshot is that capex momentum is quickly fading.“