U.S. durable goods orders drop sequentially in July

Durable goods orders in the U.S. came in slightly better than expected in July. On a sequential basis, durable goods fell 1.7 percent. Nondefense aircraft orders dropped 35.4 percent sequentially, widely consistent with expectation for a large fall in the category, but Boeing order data for the month indicated towards a larger drop.

Therefore, even though the month-on-month fall was large, it was a smaller fall than expected. Meanwhile, vehicle and parts orders rose 3.5 percent on the month and computer and electronic equipment orders rose 1.1 percent. Both added to a stronger reading at the core orders level compared to expectation. Core durable goods orders were up 1.4 percent sequentially, against the consensus expectation for a rise of 0.5 percent.

Durables shipments dropped 0.2 percent sequentially, mainly due to softness in nondefense aircraft and parts shipments, which dropped 25.4 percent. However, computer shipments rose strongly by 11.9 percent sequentially.

Overall, the softness in nondefense aircraft and parts shipments outweighed the positive thrust from shipments of computers, leading to softer tracking of equipment spending in the quarter. Nevertheless, solid core durable orders rose higher out estimates for inventory accumulation.

“On net, our estimate of Q3 GDP tracking rose two-tenths to 3.2 percent q/q saar, as the contribution from private inventory accumulation more than offset the downward revision to our tracking estimate for equipment spending”, noted Barclays.

At 15:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -119.134. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex