US: Factory orders notched biggest gain in eight months - Wells Fargo

With help from a surge in aircraft bookings, factory orders jumped 3.0 percent and in so doing notched the biggest gain in eight months, explained analysts from Wells Fargo.

Key Quotes: 

“The advance report for durable goods released last week already reported the big monthly surge in aircraft orders which lifted overall durables 6.4 percent, its biggest sequential increase since July of 2014. “

“The “new” data in today’s factory orders report is largely what happened on the nondurables side of factory orders as well as whatever modest revisions we get to previously published durable goods figures. The bottom line here is that nondurables fell 0.3 percent, marking the second straight monthly decline. Examples of nondurable goods include items that turn over quickly and may not necessarily be intended to last several years like food, cosmetics, personal products, clothing, etc.”

“Purchasing manager surveys may have shed a few points lately, but most still remain firmly in expansion territory. On that basis, and in the context of the price dynamics, we take the back-to-back declines in nondurable goods with a grain of salt, just as we will curb our enthusiasm if July brings a “surge” on the nondurables side.”

“There are times that revisions bring new understanding to the broader picture, but this is not one of those times. Core capital goods shipments gave up a tenth of a percent while orders for the same series benefitted from a positive tenth of a percent bump. On balance, our read is that core capital goods shipments are still consistent with slow but steady pace of growth in equipment spending.”