U.S. Manufactured Durable Goods Orders Increase More Than Expected in July

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Researched by Industrial Info Resources (Sugar Land, Texas)--Orders of manufactured durable goods in the United States have been somewhat unstable throughout most of 2011. Given the overall economic situation in the U.S., this has not come as much of a surprise to most analysts. The highly unstable transportation sector has been unable to maintain much momentum from month to month, and that has contributed heavily to the instability in goods orders. However, in July orders of manufactured durable goods increased 4%, doubling the estimated increase that economists had predicted.

Several sectors saw significant growth in orders during July. The primary metals sector saw orders increase 10.3%, while the motor vehicles and parts sector increased its orders 11.5% and the all-important nondefense aircraft and parts sector saw the largest jump at 43.4%. However, there were several sectors that did not have as good a month. The defense aircraft and parts sector saw its total orders decline 6.1% and the communications equipment sector dropped by 24.8%.

The news in July was more positive in the area of unfilled orders, shipments and inventories of manufactured durable goods. Unfilled orders, which had been on the rise for 15 of the last 16 months, increased 0.7%. Shipments of manufactured durable goods, which had been up seven of the last eight months, saw an increase as well, improving 2.5%, while the inventories of manufactured durable goods, which had increased for 19 consecutive months, continued to improve, increasing 0.8%.

Spending was not especially strong in the U.S. in July. Only $13.6 billion worth of industrial projects began construction activities. While this is low for a month in the middle of summer, when construction is typically strong, it is also a reflection of the instability in the overall economic situation. As the country struggles not to relapse into recession, companies are being much more careful about when and where they invest their capital and maintenance money. While more than $13 billion in construction starts is not a bad month, in recent years July has done much better.

Spending was highest in three regions of the U.S.: the Southwest, the Rocky Mountains and the West Coast. Each of these regions saw more than $2 billion in construction projects begin in July, with the Southwest leading the way. Four other regions saw investment top $1 billion: the Great Lakes, the Mid-Atlantic, the Midwest and the Northeast.

Several industries also saw significant spending in July. The Power Industry began construction activities on $3 billion in capital or maintenance projects, while the Industrial Manufacturing Industry ($2.8 billion), the Metals & Minerals Industry ($2.2 billion) and the Petroleum Refining Industry ($2 billion) also saw significant investment.

While the increase in durable goods orders is certainly a positive sign for the overall economic situation, it is somewhat overshadowed by the lull in total spending for the month. Given that durable goods orders have been anything but consistent this year, it is not surprising that economists are taking a cautious view of these latest figures and what exactly they mean to the overall economic situation in the U.S. If the country can get some momentum rolling and maintain the positive orders numbers throughout the balance of the year, then the country and the economy will have something to build on heading into 2012. But it is unlikely that things will continue to progress in such a fashion, given the instability being experienced on Wall Street and across the globe.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.