Implications:  Durable goods orders continued to recover in June, rising 7.3% on the heels of May's 15.1% jump.  That said, there is still a ways to go to make up the massive declines in March and April, with overall orders remaining 16.0% below February.  The volatile transportation sector was the biggest source of strength in June, jumping 20.0%, as a surge in orders for motor vehicles and parts more than offset declining aircraft orders.  Excluding transportation, activity came in slightly below expectations, rising 3.3% in June.  It's worth noting that orders for every core non-transportation category rose in orders for the month.  Fabricated metal products registered the largest improvement, up 4.5%, followed by primary metals (+3.6%), machinery (+2.7%), electrical equipment (+1.2%), and computers & electronic products (+0.1%).  While computers and electronic products showed the smallest improvement in June, the category has been remarkably stable throughout the Coronavirus Contraction, with orders modestly up since February (pre-pandemic), probably reflecting extra equipment needed to help people work from home.  One of the most important pieces of data from today's report, shipments of "core" non-defense capital goods ex-aircraft (a key input for business investment in the calculation of GDP growth), rose 3.4% in June, but declined at a 19.8% annualized rate in Q2 vs. the Q1 average.  We're forecasting that real GDP declined at a 35% rate in the second quarter, and we get our first look at the government's estimate when the advanced report on Q2 GDP is released this Thursday.  For a deeper dive into what drove the historic decline in the second quarter, check out this week's Monday Morning Outlook.  But remember, while the second quarter was bad – terrible in fact – activity turned a corner in May, and continued to recover in June. The third quarter, which we are roughly 1/3rd of the way through, is on track to see double-digit positive real GDP growth.  We expect the economy will continue to grow at an above-trend pace in Q4 and through 2021, but the road to recovery will take time.  What matters most, is that we have started our way down the path.

Click here  for PDF version