A stunning surge in new US military aircraft orders in June led to a surprise surge in demand for high-value manufactured goods, according to government data released on Wednesday.
New orders for defense aircraft and parts rose 80.6 percent from May, pushing the total for all durable goods up 1.9 percent to $272.6 billion for the month, the Commerce Department reported.
Economists were forecasting a 0.5 percent decline in the key data point that feeds into quarterly calculations of economic growth.
Orders are up eight of the last nine months, and even excluding the volatile transportation segment, new orders were still up 0.3 percent.
The surge suggests solid demand even as US inflation rages at a 40-year high, but economists warn uncertainty caused by the war in Ukraine could cool corporate investment plans, hampering orders in the US could affect the coming months.
The Federal Reserve is on an aggressive campaign to hike interest rates and cool the economy and quench inflationary fires – with another hike expected later Wednesday.
Even as borrowing costs rise, businesses and households still have plenty of cash and pent-up demand, in part due to supply constraints during the recovery from the pandemic crisis.
Gregory Daco, chief economist at EY Parthenon, called it “very encouraging news from the business side” and said “orders for non-defense aircraft goods were still growing strongly”.
While commercial aircraft declined for the month, vehicle and parts orders rose 1.5 percent.
Pantheon Macroeconomics’ Ian Shepherson said he expects the volatile numbers to slow in the coming months.
“The spike in headlines doesn’t change the overall picture of a slowdown in spending, but it hasn’t reached recession-like proportions,” he said in an analysis.
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