Factory Orders Mixed

Capital goods that surged in last week's advance data are revised down a bit in the factory orders report, limiting June's monthly headline increase to 0.6 percent which is inside of Econoday's consensus range but misses the consensus by 2 tenths. New orders for core capital goods (nondefense ex-aircraft) are trimmed back 4 tenths to what is still a very strong 1.5 percent monthly gain in June. May is also trimmed back, by 1 tenth to 0.2 percent. Shipments for this category, which are inputs into GDP business investment, are also trimmed back several tenths over June and May to gains of 0.3 and 0.4 percent.

Orders for nondurable goods are the fresh data in today's report and, pulled down by the effects of lower oil as well as coal prices, fell 0.5 percent in June following a 0.3 percent dip in May. The second estimate for June's durable goods orders is shaved 1 tenth to a 1.9 percent gain, a very strong showing boosted by capital goods.

Inventories rose a thin 0.2 percent for a third straight month to pull the inventory-to-shipment ratio down to 1.37 from 1.38. If manufacturing is slowing, and year-on-year total new orders in June were down 1.2 percent, at least inventories are being kept in check.

Capital goods orders had been softening and duly raising concern at the Federal Reserve over the health of business investment; June's jump does not fit into this pattern. If strength continues to appear in this reading, then a central concern for the Fed and its policy shift will be less pressing.