U.S. Durable Goods Orders Fell 4.5% in May, Ex-Transport Orders Rise 1.3%

New orders for durable goods saw a 4.5% decline in May, though a deeper look into the figures reveals a more resilient picture for the economy. This drop, which included revisions from prior months, still outpaced the consensus expectation of a 5.0% contraction. However, when excluding the often-volatile transportation sector, orders actually rose by 1.3% in May, surpassing the anticipated 0.6% increase. This non-transportation segment has seen a significant 10.2% increase over the past year, in contrast to the 3.5% overall decrease in new orders during the same period.

The overall downturn in May’s new orders was primarily driven by a substantial decrease in commercial aircraft orders, which can lead to large monthly fluctuations given the high value of individual units. Conversely, new orders in all major non-transportation categories experienced growth. This distinction underscores why orders excluding transportation are often considered a more reliable gauge of underlying economic health. Notably, orders for primary metals surged by 3.0%, industrial machinery by 1.9%, and fabricated metal products by 1.5%.

Over the past year, many key categories have demonstrated robust growth. Primary metals, fabricated metal products, machinery, and computers & electronic products have all recorded double-digit annual increases. The computer and electronic products sector stands out with an annualized growth rate of 22.5% over the last six months, nearing its strongest performance in two decades. This sustained demand is straining manufacturing capacity, as evidenced by a 0.6% rise in unfilled orders for May, contributing to an 8.5% increase over the past year.

A critical metric for business investment within GDP calculations, shipments of non-defense capital goods excluding aircraft, rose by 0.3% in May. If this pace were maintained through June, these shipments would register an 8.2% annualized increase in the second quarter compared to the first quarter average. This consistent growth in core shipments since mid-2025 points to ongoing strength in business investment, potentially fueled by a more favorable tax environment and growing expenditures on artificial intelligence initiatives. This trend is further supported by recent regional manufacturing sentiment data, with the Kansas City Fed Manufacturing Index climbing to 11 in June from 8 in May.

Key terms

1. **Durable Goods**: Products designed to last for three years or more, such as cars, appliances, and machinery.

2. **Capital Goods**: Long-lasting goods used by businesses to produce other goods and services, including industrial machinery and equipment.

3. **Unfilled Orders**: Orders received by manufacturers that have not yet been shipped, indicating future production activity.