New orders for long-lasting U.S. manufactured goods dropped in June, due largely to weak receipts for transportation equipment, the U.S. Department of Commerce reports.

New orders for manufactured durable goods fell 2.1 percent to total $192 billion in June, according to the United States Department of Commerce yesterday. Last month’s decrease, largely driven by the volatile aircraft category, followed a revised 1.9 percent increase in May and a 2.5 percent drop in April.

The median forecast of 76 economists surveyed by Bloomberg News projected a 0.3 percent increase in orders, while economists surveyed by MarketWatch had been forecasting a flat reading.

The Commerce Department said weak receipts for transportation equipment pushed down durable goods orders. Transportation equipment orders, down two of the last three months, fell 8.5 percent to total $45.4 billion in June, due to a 28.9 percent drop in non-defense aircraft and parts.

Excluding the often-volatile transportation sector, new orders edged up just 0.1 percent. Excluding defense, new orders dropped 1.8 percent.

“The headline is weak but what I look at in this report is non-defense capital goods, excluding aircraft, and they have accelerated over the last three months by nearly 18 percent, and that’s a big acceleration from 0.9 percent in the three months ending in March,” John Canally, economist and investment strategist at LPL Financial, said in a statement to Reuters. “So I think that’s a good sign for future capital spending and future business activity.”

After rising 1.7 percent in May, orders for non-defense capital goods excluding aircraft — a proxy for business spending plans — slipped 0.4 percent in June, including a decrease in machinery and computers. The decline occurred “despite government tax credits designed to stoke business investment by giving companies a tax break on capital purchases made by the end of the year,” the Wall Street Journal explains, noting that “many economists expect that spending will ramp up in the second half.” Overall non-defense new orders for capital goods dropped 4.1 percent to $69.8 billion in June.

Although demand for machinery dropped 2.3 percent, bookings for automobiles decreased 1.4 percent and those for computers fell 0.8 percent, new orders jumped 15.2 percent for communications equipment, 2.1 percent for fabricated metals and 1 percent for primary metals. Orders in June inched forward 0.4 percent for electrical equipment and 0.2 percent for electronics excluding semiconductors.

“Total durable goods orders are up 9.4 percent in the first half of 2011 versus the same period one year ago, and non-defense durable goods orders excluding aircraft have increased 11.8 percent,” Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI, writes in an analysis of the Commerce Department report. “The reason for the solid performance is that so much capacity was shed, and so quickly, during the recession, that even the current modest recovery in production creates bottlenecks and highlights the need to replace and upgrade machinery and equipment.”

Inventories of durable goods rose 0.4 percent in June, marking the 18th consecutive monthly gain in inventories. Transportation equipment had the largest increase, 1.1 percent.

Meanwhile, shipments of manufactured durable goods rose for the second consecutive month, edging up 0.5 percent to total $196 billion in June. Machinery had the largest gain, increasing 2.6 percent.

“Overall, this report highlights continued weaknesses in the durable goods sectors, much as we have discussed before,” Chad Moutray, chief economist for the National Association of Manufacturers (NAM), writes at NAM’s Shopfloor.org. “Moving forward, production in durable goods should pick up in the second half of this year. With that said, we will need to see more impressive growth in new orders in July and August if that is to come to fruition.”

Earlier

Durable Orders Rebound in May

Durable Goods Orders Fall in April

Resources

Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders – June 2011
U.S. Department of Commerce, July 27, 2011

Orders for U.S. Durable Goods Fall in Sign Investment to Cool
by Alex Kowalski
Bloomberg BusinessWeek, July 27, 2011

U.S. Durable-Goods Orders Fall 2.1% in June
by Greg Robb
MarketWatch, July 27, 2011

Instant View: Durable Goods Orders Fall on Transportation
Reuters, July 27, 2011

Durable-Goods Orders Fall
by Conor Dougherty
The Wall Street Journal, July 27, 2011

…Despite Decline, Business Equipment Activity Remains ‘Relatively Strong’
by Daniel J. Meckstroth
Manufacturers Alliance/MAPI, July 27, 2011

New Durable Goods Fell in June on Weaknesses in Transportation Sector
by Chad Moutray
Shopfloor.org (National Association of Manufacturers), July 27, 2011