A Surge in Durable Goods Orders is Fueled by Motor Vehicles and Parts

Durable good orders are always volatile, transportation is the usual culprit. But this was a huge upside surprise.

New Orders

• New orders for manufactured durable goods in May, up three consecutive months, increased $4.9 billion
  or 1.7 percent to $288.2 billion.
• This followed a 1.2 percent April increase. Excluding transportation, new orders increased 0.6 percent.
• Excluding defense, new orders increased 3.0 percent.
• Transportation equipment, also up three consecutive months, led the increase, $3.9 billion or 3.9 percent to $102.6 billion.

Shipments

• Shipments of manufactured durable goods in May, up two of the last three months, increased $4.8 billion
  or 1.7 percent to $282.7 billion.
• This followed a 0.6 percent April decrease.
• Transportation equipment, also up two of the last three months, led the increase, $4.0 billion or 4.6 percent to $91.8 billion.

Revised April Data

• Revised seasonally adjusted April figures for all manufacturing industries were: new orders, $576.3 billion
  (revised from $577.5 billion);
• Shipments, $571.0 billion (revised from $572.3 billion);
• Unfilled orders, $1,291.4 billion (revised from $1,291.3 billion) and total inventories, $855.5 billion (revised from $856.7
  billion).

Highlights from the Census Department Advance Report on Durable Goods for May.

Huge Surprise to the Upside

This report was an upside surprise, the first of three today. The others were new home sales and Case-Shiller home prices.

The Bloomberg Econoday consensus was for a 1.0 percent decline vs 1.7 percent positive. Excluding transportation, the Econoday consensus was no change. Instead, durable goods ex-transportation rose 0.6 percent.

Transportation is hugely volatile. Excluding transportation, the last two months balance to zero.

That said, the upside surprise is likely to have the Fed talking about still higher interest rates.