U.S. Durable Goods Orders Fell 4.5% in May, Ex-Transportation Orders Up 1.3%

New orders for durable goods saw a 4.5% decline in May, though a deeper look into the figures reveals a more robust economic picture beneath the headline number. This contraction, which exceeded the consensus forecast of a 5.0% drop, was primarily driven by the volatile commercial aircraft sector. Excluding transportation, orders unexpectedly rose by 1.3%, surpassing the anticipated 0.6% increase and marking a substantial 10.2% gain over the past year—the largest annual increase in four years. This suggests underlying resilience in manufacturing demand, despite the overall decline.

The significant drop in May's overall orders can be attributed almost entirely to the fluctuating commercial aircraft category, an observation consistent with April's increase where aircraft orders also played a large role. Such volatility underscores why analysts often focus on orders excluding transportation to gauge broader economic health. Beyond the transport sector, all major categories experienced growth in May. Primary metals led the gains with a 3.0% increase, followed by industrial machinery at 1.9%, and fabricated metal products at 1.5%.

Several key categories have shown accelerated growth in the past year, with primary metals, fabricated metal products, machinery, and computers & electronic products all experiencing double-digit annual growth rates. Notably, orders for computers & electronic products have surged at an annualized rate of 22.5% over the last six months, a near two-decade high for a six-month period. This strong demand has strained manufacturing capacity, leading to an 8.5% rise in unfilled orders over the past year.

Of particular significance for economic analysis, specifically for Gross Domestic Product (GDP) calculations, are capital goods shipments excluding defense and aircraft. This key measure of business investment increased by 0.3% in May. Should this trend remain constant through June, these shipments would register an 8.2% annualized growth rate in the second quarter compared to the first quarter's average. Business investment has demonstrated sustained strength since mid-2025, buoyed by a favorable tax environment and increased spending on artificial intelligence, further reinforcing a positive outlook for the sector.

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Key terms

1. **Durable Goods:** Products designed to last for three years or more, such as cars, appliances, and machinery, indicating long-term investment and consumer confidence.

2. **Capital Goods:** Long-lasting assets used by businesses to produce other goods and services, like industrial machinery or computer equipment, serving as a key indicator of business investment.

3. **Unfilled Orders:** Orders that have been received by manufacturers but have not yet been produced and shipped, often reflecting strong demand and future production activity.