A surge in new orders for aircraft and automobiles drove up demand for durable goods in July, the Commerce Department reports. However, a key measure of business investment dropped.

New orders for United States manufactured durable goods climbed more than expected in July on a surge in demand for aircraft and motor vehicles, according to the U.S. Commerce Department yesterday. Bookings for big-tickets items meant to last at least three years rose 4 percent, the biggest increase in four months, after falling a revised 1.3 percent in June.

The median projection of 81 economists surveyed by Bloomberg News called for a 2 percent gain in new orders for long-lasting manufactured goods.

Overall, orders rose to a seasonally adjusted $201.5 billion in July, 35 percent higher than the recession low in April 2009 but 18 percent below the level in December 2007, when the recession officially began.

“The latest report offered some relief that the manufacturing sector continued to expand ahead of this month’s market turmoil and the sharp drop in consumer and business confidence tied to the debt debate in Washington,” the Wall Street Journal reports (subscription required). “Manufacturing has been a key part of the recovery that began in June 2009, but regional surveys in recent weeks pointed to a downshift in activity.”

Transportation equipment, up two of the last three months, had the largest increase, climbing 14.6 percent to $53 billion. This was led by the volatile category of non-defense aircraft and parts, which soared 43.4 percent in July after falling 24 percent in June. The Boeing Co., the world’s largest aerospace firm, reportedly received 115 orders in July, up from 48 in June.

Meanwhile, demand for automobiles and auto parts jumped 11.5 percent, the most in eight years, as automakers were “able to put more models on their showroom floors as a parts shortage related to the Japanese earthquake last spring eased,” MarketWatch notes.

“The auto parts supply chain has ramped back up from the March 2011 Japanese tsunami, and foreign and domestic nameplate manufacturers have increased their production schedules,” Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI, wrote in an analysis of the Commerce Dept. data. “Outside the transportation sector, orders for primary metals surged (reflecting the motor vehicle orders), but orders in most other capital goods industries declined.”

Excluding transportation, new orders rose just 0.7 percent.

Despite the sharp rebound in overall new orders for durable goods, however, the report does offer “a cautionary signal,” the Associated Press notes. Non-defense, non-aircraft capital goods orders — considered a proxy for demand from businesses — were down 1.5 percent last month, marking the steepest decline since January.

“That suggests businesses are pulling back on spending,” AP explains. “Orders in all other major categories dropped, including computers, electronic goods and machinery.”

Nevertheless, 2011 year-to-date orders for non-defense capital goods, excluding aircraft, are up 11.8 percent over the same period last year.

“The statistics show that capital equipment purchases are inherently choppy and experience spurts and setbacks,” according to Meckstroth. “Nevertheless, business equipment spending is growing much faster than the general economy and is contributing to a re-balancing of the U.S. economy toward more investment and exports as a driver of growth and less dependency on consumer spending and housing.”

Inventories of durable goods edged up 0.8 percent in July, marking the 19th consecutive monthly rise in inventories. Transportation equipment had the largest increase, 1.5 percent.

Meanwhile, shipments of manufactured durable goods rose 2.5 percent to total $202.2 billion last month. Transportation equipment had the largest gain, rising 8 percent.

Overall, the durable goods report for July suggests a sector that is struggling less than some manufacturing surveys had implied.

“When you look at the hard data that has been coming out the past couple of weeks, it has been much better than the sentiment surveys that we have been seeing, so there has been a contrast in data between these manufacturing sentiment surveys and the consumer confidence and the hard data,” Rudy Narvas, a senior economist for investment bank Société Générale in New York, said in a Reuters report. “The hard data seems to be holding up pretty well. Whether or not one catches up to the other in subsequent months has yet to be seen.”

Earlier: Durable Goods Orders Down in June

Resources

Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders – July 2011
U.S. Department of Commerce, Aug. 24, 2011

Orders for U.S. Durable Goods Rose in July on Planes, Autos
by Shobhana Chandra
Bloomberg News, Aug. 24, 2011

Orders for Goods Rebound, but Signs of Weakness Persist (subscription required)
by Luca Di Leo and Tom Barkley
The Wall Street Journal, Aug. 25, 2011

Boeing Swells Order Book by $2.5B
Zacks Equity Research, Aug. 16, 2011

Durable-Goods Orders Climb 4.0% in July
by Jeffrey Bartash
MaketWatch, Aug. 24, 2011

Orders Rose ‘Exceptionally Strong’ 4 Percent
by Daniel J. Meckstroth
Manufacturers Alliance/MAPI, Aug. 24, 2011

Higher Durable-Goods Orders Ease Economic Worries
by Christopher S. Rugaber
The Associated Press, Aug. 24, 2011

July Durable Goods Orders Rise 4.0 Percent
Reuters, Aug. 24, 2011