Durable goods stronger than headline suggests

June 25, 2026

May durable goods orders fell 4.5%, marking the largest decrease in nearly a year. That is in line with expectations. March orders were revised higher, to 8.5% from 7.9%. Excluding transportation, orders advanced 1.3%, a tick lower than April. 

Durable goods orders rose across nearly all industries. Transportation orders formed the exception, falling 14%, pulled down by a 51.8% collapse in civilian aircraft orders. That followed a 167% increase in civilian aircraft the previous month. Boeing booked orders of 27 new planes in May, a sharp drop from 136 in April. 

Orders for motor vehicles and parts posted a modest increase of 1.1%, marking six consecutive months of gains. Higher energy prices blunted a surge in auto purchases spurred by tax refunds. 

Vehicle sales have leveled out at about a 16-million-unit rate, more than a million lower than the pace we saw pre-pandemic. Vehicle producers have absorbed much of the rise in costs due to tariffs to hold prices in check, after they soured post-pandemic.  

AI related orders are still supporting spending. Computers and electronic products rebounded 0.3% after falling in April. That puts gains in eight of the last nine months. Computers and related products grew 1.6%, outpacing communications equipment.

Primary metals orders climbed 3%; machinery orders rose 1.9%; fabricated metals orders increased 1.5%; and electrical equipment, appliances and components moved up 0.3%.

A rise in core orders showed the resilience of manufacturers. Nondefense capital goods orders excluding aircraft, a proxy for capital spending, rose 1.6%, after falling 0.7% in April. These orders were placed before the reopening of the Strait of Hormuz. 

Some of that strength reflects a restocking of inventories depleted last year and a push to order ahead of additional price hikes. Tariffs are slated to rise again in August, as the administration moves to replace the revenues lost to tariffs ruled illegal by the Supreme Court. That should worry the Federal Reserve, as hoarding amplifies inflation. 

Annual core order growth has remained above 10% for three straight months. The last time this happened was after the post-pandemic surge in orders. The Institute for Supply Management (ISM) Manufacturing New Orders subindex has been in expansionary territory since the start of the year, despite global supply chain disruptions. May’s ISM Manufacturing New Orders reading was the second highest since early 2022.

Nondefense capital goods shipments excluding aircraft increased 0.3%, showing increases in eleven of the last thirteen months. We forecast business fixed investment to rise at a 9.5% annualized pace in the second quarter, significantly upgraded on the resilience of the economy during the closure of the strait and AI-related spending.