Implications: Durable goods orders fell in June at the fastest pace in nearly two years.  Reason for panic?  We think not.  Aircraft led orders lower, as Boeing reported just twelve new orders in June, compared to 125 in May and 153 in June 2015.  Excluding transportation, durable goods orders declined 0.5% in June.  Orders have been relatively weak in 2016 compared to other measures of the economy, coming in contrast to continued gains in employment, rising wages, a pick-up in inflation, and positive readings from the ISM for both the manufacturing and service sectors.  What could be causing the divergence in readings? First, companies are becoming more efficient, making better use out of existing equipment.  Second, companies may be paring back on spending due to the slowdown in global growth and uncertainty regarding international operations. If that's the case, expect orders to pick up in the months ahead as the dust settles and companies feel more confidence building for the future. The employment market shows that companies are planning for growth.  Shipments of "core" capital goods - non-defense, excluding aircraft – declined 0.4% in June, and fell at a 1.7% annualized rate in the second quarter versus the Q1 average.  This is the measure that the government uses for calculating GDP, so durable goods were a drag, but that doesn't mean that we expect GDP growth slowed in Q2. The first estimate of second quarter growth comes on Friday, and we are forecasting that the U.S. economy grew at around a 2.3% rate, a pick-up from the 1.1% annual rate in the Q1, and just slightly below the 2.5% annual growth rate seen over the past two years.  Looking forward, we expect durable goods to rebound.  Outside of aircraft, the biggest drag on orders in the past year has been machinery, but that should end soon given the rebound in energy prices.  In other words, business investment should pick up in the months ahead.  In addition, consumer purchasing power is growing with more jobs and higher incomes, while debt ratios remain very low, leaving room for an upswing in big-ticket spending. On the housing front, pending home sales, which are contracts on existing homes, rose 0.2% in June after declining 3.7% in May.  Combined, the past two months suggests existing home sales, which are counted at closing, may take a temporary breather in July after rising substantially earlier this year.

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