Boeing drives US durable goods orders to unexpected high

New orders for durable goods in the US rose for the third consecutive month in June by 4.2 per cent, higher than the 3.6 per cent growth recorded in May and far above analyst expectations of 0.5 per cent growth.

But some beady eyes noted that a lot of this growth stemmed from a single source.

The surge in headline orders was primarily driven by a 31.4 per cent monthly jump in commercial aircraft orders, and a 29.6 per cent hike in defence orders. But when we exclude all transportation, durable goods orders were flat, following previous growth of 0.7 per cent. Expectations here had also been for a 0.5 per cent rise.

On the bright side, orders excluding defence and aircraft increased 0.7 per cent in June, suggesting that there could be a pick up in business investment in the third quarter. However, shipments of these goods fell by 0.9 per cent, suggesting business investment may have fallen in the second quarter.

Paul Ashworth, chief US economist at Capital Economics, said these results mean there's now a "good chance that second quarter GDP was, at most, one per cent annualised". He added that he doubts a weak second quarter GDP result would persuade the Fed to delay its tapering off of asset purchases as chairman Ben Bernanke has already factored in "headwinds" from fiscal tightening that he expects to fade later in the year.

Source: Capital Economics

Yesterday, Boeing reported its Commercial Airplanes division booked $40bn in new orders in the second quarter of 2013, and has an overall backlog of nearly 4,800 airplanes valued at a record $339bn. Over 1,000 are variants of the 787 model.

A 15 per cent jump in revenues in this division helped push total profits up 13 per cent and caused Boeing to raise its full year earnings forecast to $83-86bn from $82-85bn.

However, Boeing shares were down this morning after the US Federal Aviation Authority ordered it to remove or inspect emergency beacons in its 787 Dreamliners following the outbreak of a fire on one of its aircraft at Heathrow on 12 July.