US DATA: Underlying Factory Orders See Solid July, But Overall Trend Is Moderate

July's full Manufacturers’ Shipments, Inventories, & Orders report showed core activity improving but overall settling in below the strong levels seen earlier in the year. In other words, activity is not as bad as it appeared in the post-tariff-front running hangover months of the summer, but likewise there doesn't appear to be an imminent upturn in manufacturing activity or equipment investment.

• While we caution against taking too much signal from month-to-month readings given significant volatility, July factory orders fell 1.3% M/M (-4.8% prior), with ex-transport orders rising 0.6% (0.4%), both exactly in line with consensus expectations.
• That's two consecutive sharp falls in overall manufacturing orders, and three in the last 4, leaving the seasonally-adjusted level at basically the same nominal dollar level it has hovered around since early 2022 (with the exception of the tariff front-running burst earlier this year). On a Y/Y basis, orders are up 3.5%.
• Ex-transportation (which for one thing strips out extremely volatile aircraft orders that have weighed heavily on overall orders the last couple of months) had its biggest rise in 16 months and grew for a 3rd consecutive month, but is up only 0.7% Y/Y. On a 3M/3M annualized basis, this moved back into positive territory for the first time in 4 months, albeit at just 0.7% (also).
• The ex-transport figure echoed the advance durable goods readings released previously which were largely confirmed in this final report, most notably core durable goods orders which rose 1.1% M/M and suggesting that underlying activity was regaining some footing after a weak few months.
• Durable and nondurable goods industries each make up about 50% of total factory orders. Durable orders are up 7.3% Y/Y but fell 2.8% M/M in July (on aircraft), while nondurables growth remained tepid at 0.3% M/M (-0.1% Y/Y).
• The unfilled orders-to-shipments ratio fell from its 15-month high 7.01 in June to 6.87, though inventories-to-shipments edged down to the lowest since October 2022 at 1.56 (1.57 prior).