The headline print of a record-breaking 22.6% gain - smashing the 8.0% expectation - hides the extremely obvious factor of the largest civilian aircraft orders (an entirely one-off non-repeatable factor). Durables ex Transportation collapsed from a 3% gain to a 0.8% drop - the biggest drop in 2014, missing expectations by the most in 8 months. Perhaps even more concerning, non-defense ex-aircraft new orders dropped 0.5% (missing expectations of a 0.2% gain).
One-off...
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Boeing orders from UK air show lead to nondef aircraft orders increased 318%
Transportation Equipment orders in July were $133 billion, up from $76.3 billion in June; driven by Nondefense aircraft and parts new orders at $70.3 billion, up from $16.9 billion
Here is a chart of what happens as everyone scrambles to order Boeing jets ahead of what may be the upcoming "expiration" of the ExIm bank: nothing short of an outlier print for transportations nondefense aircraft and parts new orders:
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Reality is much less pretty, with the 0.8% drop in ex-transports the largest of 2014.
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There was some good news in the capital goods nondefense ex-aircraft shipments and orders prints, which posted a quickening in Y/Y print as follows...
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... until one realizes that once again, it was all in the seasonal adjusment factor: July non-defense capital goods ex-aircraft shipments unadjusted plunged from $75.8 billion to $66.3 billion, while New Orders tumbled from $78.5 billion to $68.3 billion. As a reminder, even the BLS now admits it is having trouble figuring out what the correct seasonal adjustment factor should be.
For now, however, let's wait as the beancounter models take the SA prints and use them to boost GDP estimates.
