The headline from the Commerce Department’s new report on the economy is that new shipments and new orders of durable goods by U.S .manufacturers increased at healthy rates in June – by 15 percent and 7 percent respectively. Larry Kudlow almost certainly will herald the numbers as proof that American manufacturing is back, and good times are just around the corner.
Don’t believe it. Only one industry, motor vehicles and parts, was responsible for almost all of the gains. June shipments of motor vehicles and parts jumped 80 percent from their abysmal levels in May, and new orders increased 87 percent. Set aside that industry, however, and U.S. durable goods manufacturers treaded water or worse in June. Their shipments were up less than 4 percent, and their new orders fell more than 6 percent.
The story is the same for the capital goods that businesses order and buy to maintain or expand operations: In June, shipments by capital goods manufacturers increased 3.5 percent and their new orders fell 16.5 percent. Continue reading.