US Factory Orders: Soft reading but steady improvement in business spending - Wells Fargo

According to analysts from Wells Fargo, the 3.3% decline in factory orders for July is largely a reflection of a drop in aircraft orders following a surge in the prior month. They see that core orders and shipments still indicate steady improvement in business spending.

Key Quotes: 

“The payback from June’s surge in aircraft orders was enough to pull the headline into negative territory, but ex-transportation orders were up 0.5 percent—the best month since January.”

“Inventories increased for a second-straight month; this is consistent with our expectation for inventories to be additive to growth in the second half. The fact that the inventory-toshipment ratio came down suggests the stockpiling is justified.”

“In a positive sign for future spending prospects, core capital goods orders also increased in July, growing 1.0 percent which puts the 3-month annualized rate for that series at 5.1 percent.”