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DURABLE GOODS LOSE ALTITUDE ON AIRCRAFT, CORE CAP NEW ORDERS POST SURPRISE DIP

New orders for long-lasting, U.S.-made goods USGDN=ECI slid by 9.3% last month, not quite as steep as the expected 10.8% decrease and marking an abrupt reversal from May's 15.5% surge.

As is often the case with the durable goods headline, it was all about airplanes.

Drilling down into the Commerce Department's report - which covers everything from air fryers to attack drones - the slide was mostly attributable to a 51.8% drop in commercial aircraft orders. But that comes on the heels of a 231.6% surge in non-defense aircraft in May. Remove all transportation-related items, and new orders would have eked out a 0.2% increase. A 9.1% jump in orders for defense aircraft and a 0.9% increase in motor vehicles/parts did their bit to soften the overall decline.

"The near-double-digit decline in durable goods orders in June reflected three main forces," writes Michael Pearce, deputy chief U.S. economist at Oxford Economics. "First, a sharp drop in non-defense aircraft orders as Boeing received fewer orders following a bumper May. Second, defense capital goods orders eased. Third, non-defense capital goods ex-aircraft orders fell sharply, which we think partly reflects trade policy uncertainty."

Core capital goods - which excludes aircraft and defense items and is considered a barometer of U.S. corporate capex plans - posted a surprise 0.7% drop, in defiance of the 0.2% gain economists predicted.

"Business equipment investment likely stagnated in Q2, and we expect further weakness in the second half," Pearce adds. "We expect the impact of trade policy uncertainty and tariffs will drive outright declines in the second half, before the impact of business tax cuts drives a rebound in 2026."

(Stephen Culp)

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