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US July durable goods orders ex-transportation tumble

The Commerce Department report on Wednesday was the latest to indicate continued subdued U.S. economic growth and an increased risk of a slide back into recession, though most analysts still do not believe a double-dip recession is imminent.

“It adds to the slew of softer-than-expected data coming out of the U.S., increasing the risk of a very gradual recovery going forward,” said Matthew Strauss, senior currency strategist, RBC Capital Markets in Toronto.

“I think we’re not yet looking at double-dip as a base case scenario, but clearly the risk of entering into a period of very, very sluggish growth has risen.”

The Commerce Department said durable goods orders excluding transportation dropped 3.8 percent — the biggest fall since January 2009 — after rising 0.2 percent in June. Overall orders rose 0.3 percent following a revised 0.1 percent fall in June.

Analysts polled by Reuters had forecast orders increasing 2.8 percent last month from June’s previously reported 1.2 percent fall. Orders excluding transportation had been forecast to increase 0.5 percent from a previously reported 0.9 percent fall. U.S. stock index futures fell on the report, while prices for safe-haven government debt prices rallied. The dollar U.S. dollar fell against the yen and Swiss franc. Durable goods orders are a leading indicator of manufacturing and last month’s moderate increase was the latest indication the sector that has been the main driver of the economy’s recovery from the worst downturn since the Great Depression is losing some steam.

Overall orders last month were lifted by the volatile commercial aircraft component, which jumped 75.9 percent after a surprise 25.3 percent fall in June. The jump last month reflected 130 aircraft orders received from Boeing and probably included some of the 49 plane bookings in June.

Defense aircraft orders dropped 8.3 after rising 5.7 percent in June, while motor vehicle orders rose 5.3 percent after June’s 4.0 percent rise.

Orders outside transportation were depressed by weak bookings for machinery, electrical equipment and computers and related products and

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 8.0 percent last month after a 3.6 percent increase in June. Markets had expected a 0.4 percent rise last month.

“The strength of second quarter GDP was business spending. It looks like businesses are pulling back from this commitment in a very big way in July. It’s an indication of how sentiment is deteriorating,” said Christopher Low, chief economist at FTN Financial in New York.

Durable goods inventories rose 0.6 percent after increasing 1.3 percent in June. It was the seventh straight month of gains in inventories.

Shipments, which go into the calculation of gross domestic product, last month rose 2.2 percent, adding to June’s 0.2 percent gain. Unfilled orders slipped 0.1 percent after rising for three straight months.