Durable-goods Orders Remained Strong in May

New orders for durable goods increased 0.7 percent in May, following a 0.4 percent gain in April, the 11th increase in the last 13 months. Total durable-goods orders are up 10.0 percent from a year ago. The May gain puts the level of total durable-goods orders at $267.2 billion, the second highest on record (see first chart).

New orders for nondefense capital goods excluding aircraft, or core capital goods, a proxy for business equipment investment, rose 0.5 percent in May after increasing 0.3 percent in April. Orders are up 6.4 percent from a year ago, with the level at $73.4 billion, a new record high (see first chart).

However, rapid price increases have an impact on capital goods orders. In real terms, after adjusting for inflation, real new orders for nondefense capital goods – one of AIERs leading indicators – were $41.7 billion in April, measured in 1982 dollars, a solid level by historical comparison but well shy of the record high (see first chart). Furthermore, producer prices for capital equipment rose 0.7 percent in May, suggesting that in real terms, new orders for nondefense capital goods may have declined in May.

Nearly every major category (six of seven) in the durable-goods report showed a gain in May. Among the major individual categories, primary metals led with a 3.1 percent increase, followed by machinery orders and transportation equipment orders with increases of 1.1 percent and 0.8 percent, respectively. Computers and electronic products gained 0.5 percent while all other durables added 0.2 percent. Within the transportation equipment category, motor vehicles and parts were up 0.5 percent, but nondefense aircraft fell 1.1 percent, and defense aircraft gained 8.1 percent. Electrical equipment and appliances fell 0.9 percent (see second chart). From a year ago, every major category shows a solid gain.