The Commerce Department's Bureau of the Census announced today that new orders for manufactured durable goods increased from June to July by $2.7 billion or 1.6 percent. This was a lot higher than the consensus forecast of +0.4 percent. This follows a 0.2 decrease in June and a 4.2 percent increase in May. Durable goods orders have been tracing out a zig-zag pattern for several months. Of the past 13 monthly changes 7 have been down and 6 up. But, the upward zigs have been generally greater than the downward zags so that, in the past year, new orders for durable goods have grown by 11.0 percent. This compares with a flat first half of 1995 and an average growth rate of 12.34 percent from 1993 to 1994. So, it looks like the uptrend begun in mid-1995 is still intact. What's more, the growth rate is almost as great as it was before it slowed down due to the Fed's 1994 interest rate squeeze.

Shipments of durable goods were flat for most of 1995; but, started to show some gains in 1996. July shipments increased $1.1 billion or 0.7 percent, following a 0.4 decrease in June. July's increase was the third increase in four months and, for 1996 thus far, shipments are 4.2 percent higher than the same period last year.

Unfilled orders for durable goods increased by 1.0 percent in July for the tenth increase in the last eleven months.

Last month I speculated that the month-to-month declines in orders and shipments might be the first signs of the fall off in the durable goods sector predicted by Fed chairman Greenspan in his testimony before Congress. But, this month, those two indicators reversed direction, resuming the uptrends that began around the first of the year. We're going to have to see a lot more data before we can determine whether the durable goods sector is slowing down.

Pat Lafferty (MF Merlin)

Transmitted: 8/23/96