June durable goods orders increased just 1.0 percent, falling short of a consensus expectation of a 3.0 percent rise, but get under the hood of this report, and the engine of the factory sector is still running fine, explained analysts at Wells Fargo.
Key Quotes:
“It may have been a miss on the headline for durable goods orders with just a 1.0 percent increase in June, but the miss can be attributed, at least partially, to the fact that civilian aircraft orders were decidedly underwhelming.”
“After taking revisions into account, we call that a better-than-expected print for ex-transportation orders. In fact, aside from the flub from aircraft, today’s report is the latest indication that our expectation for moderate expansion in the factory sector remains on track.”
“Our expectation for tomorrow’s GDP report is that inventories will add 0.4 percentage points to the headline growth rate. In light of this latest data, there is some risk that the boost from inventories will be smaller. On the plus side, shipments of core capital goods, which tend to be a good barometer for equipment spending, increased 1.0 percent in June, which handily beat the 0.4 percent gain that had been expected by the consensus.”
“Our above-consensus call for tomorrow’s GDP report is 4.7 percent, which, if realized, would be the fastest pace of economic growth since 2014.”
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