8:50AM  :  ECON: Durable Goods Higher Than Expected, but Weak Internals

- Headline Durables Orders +3.7 vs +2.0 forecast
- Excluding Transportation -0.1 vs +0.5 forecast
- Nondefense, Excluding Aircraft -1.1 vs +0.6 forecast

- Market Reaction: The Nondefense, Ex-Aircraft line item on the Durable Goods report is the more relevant than the headline itself when it comes to assessing the average American business (because a relative minority are buying planes and filling military contracts). The "excluding transportation" line item fills a similar role. In short, the stronger headline was propped up by a smaller number of businesses dealing in bigger-ticket orders while most other businesses were spending less than expected. As such, bond markets actually improved despite the much stronger headline reading.

New orders for manufactured goods in July, down following three consecutive monthly increases, decreased $12.0 billion or 2.4 percent to $485.0 billion, the U.S. Census Bureau reported today. This followed a 1.6 percent June increase. Excluding transportation, new orders increased 1.2 percent.

Shipments, up two of the last three months, increased $5.3 billion or 1.1 percent to $487.6 billion. This followed a 0.3 percent June decrease.

Unfilled orders, up five of the last six months, increased $4.0 billion or 0.4 percent to $1,033.9 billion. This was at the highest level since the series was first published on a NAICS basis in 1992, and followed a 2.1 percent June increase. The unfilled orders-to-shipments ratio was 6.44, up from 6.38 in June.

Inventories, up seven of the last eight months, increased $1.5 billion or 0.2 percent to $629.7 billion. This was at the highest level since the series was first published on a NAICS basis and followed a 0.2 percent June increase. The inventories-to-shipments ratio was 1.29, down from 1.30 in June.