Live Markets-Better than it looks: Solid core cap bodes well for GDP

Investors embarked on what promises to be an eventful week with one tidbit of data to mull over.

New orders for long-lasting, U.S.-made goods increased by 0.3% in June, according to the Commerce Department, falling a mile short of consensus and failing to show meaningful recovery from May's 4.0% drop.

But the headline miss doesn't tell the whole story, according to Oliver Allen, senior U.S. economist at Pantheon Macroeconomics.

"This is another strong report," Allen says.

"The headline was held back a bit by falls in the volatile autos and defense aircraft components. But underlying orders look solid," Allen adds. "Surging AI-driven orders of computer and electronics are part of the story, but orders also likely are being boosted temporarily by stockpiling activity, as firms try to get ahead of supply chain disruptions linked to the energy shock."

Digging below the headline of the report — which covers everything from waffle irons to attack drones — the downside surprise is attributable to a 0.6% decline in autos/parts, a 7.2% decline in defense aircraft and a 0.2% drop in transportation-related items. Remove all transportation-related items, and new orders would have increased by 0.6%.

Capital goods and primary metals both rose by 1.1%.

In sunnier news: new orders for core capital goods — which exclude aircraft and defense categories and are considered a barometer of U.S. corporate capex plans — increased by 0.9%, a tad north of the 0.8% analysts expected.

Even so, it marks an abrupt deceleration from May's 1.9% gain.

"Looking past the soggy headline, business investment is holding up well," writes Oren Klachkin, financial market economist at Nationwide. "Our upbeat corporate capex outlook remains intact despite new geopolitical and tariff risks."